Acme Company uses process costing and has three processing d…
Acme Company uses process costing and has three processing departments. During the month of May, the first department completes and transfers out 40,000 units to the second department. The total cost of the units transferred into the second department is $144,000, or $3.60 per unit. For purposes of computing the May 31 balance of the second department’s ending work in process inventory, the cost per equivalent unit of production with respect to transferred-in costs is $3.80. What is the best explanation for why the cost per equivalent unit on May 31 is higher than the cost of the units transferred in during the month of May?