Question

Alvis Construction Supply Company has a department that manufactures wood trusses (wood frames used in the construction industry). The following information is for the production of these trusses for the month of February:

Work-in-process inventory, February 1		3,800	trusses
Direct materials: 100% complete	$	10,280
Conversion: 40% complete	$	15,058
Units started during February		17,800	trusses
Units completed during February and transferred out		16,800	trusses
Work-in-process inventory, February 29
Direct materials: 100% complete
Conversion: 20% complete
Costs incurred during February
Direct materials	$	58,840
Conversion	$	91,892

Required

Using the weighted-average method, calculate the following:

1-a. Costs per equivalent unit. (Round your answers to 4 decimal places.)

1-b. Cost of goods completed and transferred out. (Round "Cost per EU" to 4 decimal places. Round final answer to nearest whole dollars.)

1-c. Costs remaining in the Work-in-Process Inventory account. (Round "Cost per EU" to 4 decimal places. Do not round other intermediate calculations. Round final answer to nearest whole dollars.)

2. Assume that you are the company’s controller. The production department’s February equivalent unit cost is higher than expected. If the manager of the first department asks you to do him a favor by increasing the ending inventory completion percentage from 20 to 40% to lower the unit costs, how much would unit cost be affected by this request? (Round your answer to 4 decimal places.)

Answer 1

		Units
Reconciliation of Units
A	Opening WIP	3,800
B	Introduced	17,800
C=A+B	TOTAL	21,600
D	Transferred	16,800
E=C-D	Closing WIP	4,800

Statement of Equivalent Units
		Material		Conversion Cost
	Units	Complete %	Equivalent units	Complete %	Equivalent units
Transferred	16,800	100%	16,800	100%	16,800
Closing WIP	4,800	100%	4,800	20%	960
Total	21,600	Total	21,600	Total	17,760

Requirement 1a

Cost per Equivalent Units
COST	Material	Conversion Cost	TOTAL
Beginning WIP Inventory Cost	$               10,280	$         15,058	$          25,338
Cost incurred during period	$               58,840	$         91,892	$        150,732
Total Cost to be accounted for	$               69,120	$       106,950	$        176,070
Total Equivalent Units	21,600	17,760
Cost per Equivalent Units	$ 3.2000	$ 6.0220

	Material	Conversion
Cost per equivalent Unit	$ 3.2000	$ 6.0220

Requirement 1b

Statement of cost
Cost	Equivalent Cost/unit	Transferred
		Units	Cost Allocated
Material	$ 3.2000	16,800	$     53,760
Conversion Cost	$ 6.0220	16,800	$ 101,169
TOTAL	$         176,070	TOTAL	$ 154,929

	Material	Conversion	Total
Units Completed	$ 53,760	$ 101,169	$ 154,929

Requirement 2

Unit cost will for Material would remain same but Cost per Equivalent unit for Conversion will Decrease to $5.7131

	Material	Conversion
Cost per equivalent Unit	$ 3.2000	$   5.7131

Working for requirement 2

Statement of Equivalent Units
		Material		Conversion Cost
	Units	Complete %	Equivalent units	Complete %	Equivalent units
Transferred	16,800	100%	16,800	100%	16,800
Closing WIP	4,800	100%	4,800	40%	1,920
Total	21,600	Total	21,600	Total	18,720

Cost per Equivalent Units
COST	Material	Conversion Cost	TOTAL
Beginning WIP Inventory Cost	$               10,280	$         15,058	$          25,338
Cost incurred during period	$               58,840	$         91,892	$        150,732
Total Cost to be accounted for	$               69,120	$       106,950	$        176,070
Total Equivalent Units	21,600	18,720
Cost per Equivalent Units	$               3.2000	$         5.7131