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		4,700	trusses
Direct materials: 100% complete	$	11,180
Conversion: 40% complete	$	15,958
Units started during February		18,700	trusses
Units completed during February and transferred out		17,700	trusses
Work-in-process inventory, February 29
Direct materials: 100% complete
Conversion: 20% complete
Costs incurred during February
Direct materials	$	59,740
Conversion	$	92,792

Required

Using the FIFO 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. (Do no round your intermediate calculations. Round your final answer to the nearest whole dollar.)

1-c. Costs remaining in the Work-in-Process Inventory account. (Do no round your intermediate calculations. Round your final answer to the nearest whole dollar.)

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

1-a.		Direct materials	Conversion
	Work in process, february 1 (4,700 , Conversion -60% )	-	2,820
	Units Started & Completed ( 17,700 - 4,700 )	13,000	13,000
	Work in process, february 28 (5,700 , Material 100% ,Conversion -20% )	5,700	1,140
	Equivalent Units	18,700	16,960
		Direct materials	Conversion
	Cost incurred during the February	59,740	92,792
	/ Equivalent Units	18,700	16,960
	Cost per equivalent units $	3.1947	5.4712
1-b.		Amount $
	Cost of work in process, february 1 ( 11,180 + 15,958 )	27,138
	Add: Cost incurred on Work in process , february 1 in February
	Conversion ( 2,820 x 5.4712 )	15,429
	Add: Cost of units started & Completed in February
	Direct materials ( 13,000 x 3.1947 )	41,531
	Conversion ( 13,000 x 5.4712 )	71,126
	Cost of goods completed & transferred out	1,55,223
1-c.)		Amount $
	Direct materials ( 5,700 x 3.1947 )	18,210
	Conversion ( 1,140 x 5.4712 )	6,237
	Cost of remaining work in process inventory	24,447
2.)		Direct materials	Conversion
	Work in process, february 1 (4,700 , Conversion -60% )	-	2,820
	Units Started & Completed ( 17,700 - 4,700 )	13,000	13,000
	Work in process, february 28 (5,700 , Material 100% ,Conversion -40% )	5,700	2,280
	Equivalent Units	18,700	18,100
		Direct materials	Conversion
	Cost incurred during the February	59,740	92,792
	/ Equivalent Units	18,700	18,100
	Cost per equivalent units $	3.1947	5.1266
		Direct materials	Conversion
	Cost per equivalent units ( at 20% completion of ending inventory )	3.1947	5.4712
	Less :Cost per equivalent units ( at 40% completion of ending inventory )	3.1947	5.1266
	Unit cost affected by this request -Lower as compare to previous one ($)	-	0.3446