Question

Assume that Superb Hancock uses first-in, first-out (FIFO) for inventory costing instead of the weighted-average inventory valuation. If materials used in production cost $15,000 and conversion costs incurred were $25,000, what amount of inventory (rounded) was transferred to the next department under FIFO

Answer 1

Answer: $33,280

Explanation:

With FIFO, materials cost is added at the beginning.

Cost per unit of materials in production:

= 15,000 / 10,000

= $1.50

Cost per unit of conversion:

= 25,000 / Equivalent unit of production for conversion

Equivalent unit of production for conversion:

2,000 units were not transferred at the end of the month seeing as only 8,000 units were:

= 8,000 + (2,000 * 70%)

= 9,400 units

= 25,000 / 9,400

= $2.66

Amount transferred:

= 8,000 units * (Material cost + Conversion cost)

= 8,000 * (1.50 + 2.66)

= $33,280