Transferred-in costs
Transferred-in costs are costs a unit carries from an earlier process department into the next one, treated like a material added at the start—100% complete the moment the unit arrives.
See it move
Department 2 receives 5,000 units from Department 1, each carrying a transferred-in cost of €3.00, totalling €15,000. By month end, 4,200 units are completed and transferred out, carrying €12,600 of that cost, and 800 units sit in closing work-in-progress carrying €2,400 — full rate, because transferred-in cost is 100% complete the instant a unit arrives, regardless of how much conversion work remains.
The formula
Variables
- Equivalent units for transferred-in cost (units)
- Units completed and transferred out (units)
- Closing WIP units (units)
Transferred-in cost is fully incurred the moment a unit arrives in the receiving department, so every unit — completed or still in closing WIP — counts as 100% complete for this cost element.
Check yourself
Department B receives 6,000 units from Department A during the month, each carrying a transferred-in cost of €4.50 (a total of €27,000). By month end, Department B has completed and transferred out 5,500 units; the remaining 500 units are in closing WIP, 100% complete for the transferred-in cost (as always) but only 40% complete for Department B's own conversion work. What is the transferred-in cost included in Department B's closing WIP?