Steven Corporation uses the FIFO method in its process costing system. Department A's beginning work in process inventory consisted of 15,000 unit, 100% complete with respect to materials and 40% complete with respect to conversion costs. The total cost of this inventory was $31,000. A total of 40,000 units were transferred out during the month. The costs per equivalent unit were computed to be $1.30 for materials and $2.20 for conversion costs. What was the cost of the units completed and transferred out? A. $140,000
B. $131,700
C. $138,300
D. $118,500

The cost of the units completed and transferred out is C. $138,300

Explanation:

FIFO method means that the units that were incomplete at the beginning of the period are the first to be completed followed by those started during the year.

The cost of of units completed and transferred is calculated as follows :

Cost in Opening Work In Process                                                  $31,000

Cost to Finish Opening Work In Process :

Raw Materials ( $1.30 × 0)                                                                   $0

Conversion ($2.20 × (15,000 × 60%))                                             $19,800

Started and Completed ((40,000 - 15,000) × ($1.30 + $2.20))     $87,500

Total Cost of of units completed and transferred                       $138,300

Conclusion :

The cost of the units completed and transferred out is $138,300.

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