What Are Transferred-In Costs?

Transferred-in costs are costs accumulated during the upstream production processes within a company. Transferred-in costs are the costs accumulated by the product at any given point in production. They are "transferred in" to the new business department that receives the partially finished product and is responsible for continuing the production process. Transferred-in costs combine manufacturing costs by the various departments and production processes.

Key Takeaways

  • Transferred-in costs are costs accumulated during the upstream production processes within a company.
  • Transferred-in costs combine manufacturing costs by the various departments and production processes.
  • They are typically used for companies that produce continuous similar units through a series of operations such as petroleum, chemical, textile, and food processing companies.
  • For example, if department A is responsible for starting a widget, and department B is responsible for finishing the widget, the costs incurred during production in department A would be "transferred-in costs" for department B.
  • Transferred-in cost is also referred to as the accumulated cost of a product when it first arrives in the production department.

How Transferred-In Costs Work

Transferred-in costs are more often used in cost accounting for companies that produce continuous similar units through a series of operations such as petroleum, chemical, textile, and food processing companies.

Example of Transferred-In Costs

If department A is responsible for starting a widget, and department B is responsible for finishing the widget, the costs incurred during production in department A would be "transferred-in costs" for department B who is responsible for continuing the production process. Transferred-in cost is also referred to as the accumulated cost of a product when it first arrives in the production department. The unit cost of a product is determined by dividing the total costs charged to the production department by the output of that department.