During September, the Finishing Department of Perry Hall Company had beginning t

Question

During September, the Finishing Department of Perry Hall Company had beginning transferred in units of 500 units with costs of $125,000. During the month, 800 units were transferred in from the Milling Department with transferred in costs of $200,000. It had 400 units in ending Work-in-Process Inventory. What is the total cost of production for the units transferred to the Finishing Department in September under the first-in, first-out (FIFO) method? A) $258,336 B) $125,000 C) $75,000 D) $150,000

Explanation / Answer

Inventory at the Finishing Department:

Total units = 500+800 = 1300 Units

Closing Balance         = 400     "

Units Finished            = 900

For FIFO

the value of 900 units would be

400 from the opening balance at that rate = 400 *(125000/500) = 400*250=100,000

500 from units transferred during the

current period                                        = 500*(200000/800) = 500*250=125,000

    Total Cost                                                                                        225,000

Here, both the rates are 250 per unit.

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