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		4,000	trusses
Direct materials: 100% complete	$	10,480
Conversion: 20% complete	$	15,258
Units started during February		18,000	trusses
Units completed during February and transferred out		17,000	trusses
Work-in-process inventory, February 29
Direct materials: 100% complete
Conversion: 40% complete
Costs incurred during February
Direct materials	$	59,040
Conversion	$	92,092

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 intermediate values to 4 decimal places.)

1-c. Costs remaining in the Work-in-Process Inventory account.

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 40 to 60% to lower the unit costs, how much would unit cost be affected by this request? (Round your answer to 4 decimal places.)

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 4,000 trusses Direct materials: 100% complete $ 10,480 Conversion: 20% complete $ 15,258 Units started during February 18,000 trusses Units completed during February and transferred out 17,000 trusses Work-in-process inventory, February 29 Direct materials: 100% complete Conversion: 40% complete Costs incurred during February Direct materials $ 59,040 Conversion $ 92,092 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 intermediate values to 4 decimal places.) 1-c. Costs remaining in the Work-in-Process Inventory account. 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 40 to 60% to lower the unit costs, how much would unit cost be affected by this request? (Round your answer to 4 decimal places.)

Answer 1

Requirement 1a

		Units
Reconciliation of Units
A	Opening WIP	4000
B	Introduced	18,000
C=A+B	TOTAL	22,000
D	Transferred	17,000
E=C-D	Closing WIP	5,000

Statement of Equivalent Units
		Material		Conversion Cost
	Units	Complete %	Equivalent units	Complete %	Equivalent units
Transferred	17,000	100%	17,000	100%	17,000
Closing WIP	5,000	100%	5,000	40%	2,000
Total	22,000	Total	22,000	Total	19,000

Cost per Equivalent Units
COST	Material	Conversion Cost	TOTAL
Beginning WIP Inventory Cost	$     10,480.00	$         15,258.00	$         25,738.00
Cost incurred during period	$     59,040.00	$         92,092.00	$       151,132.00
Total Cost to be accounted for	$     69,520.00	$       107,350.00	$       176,870.00
Total Equivalent Units	22,000	19,000
Cost per Equivalent Units	$           3.1600	$               5.6500

Requirement 1b and 1c

Statement of cost
Cost	Equivalent Cost/unit	Ending WIP		Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$ 3.16000	5,000	$         15,800.00	17,000	$         53,720.00
Conversion Cost	$ 5.65000	2,000	$         11,300.00	17,000	$         96,050.00
		TOTAL	$         27,100.00	TOTAL	$       149,770.00

Cost of goods completed and transferred= $149,770.00

Cost remaining in WIP account= $27,100.00

Requirement 2

Unit cost for material will remain the same

Unit cost for Conversion cost will reduce by $0.2825 per unit .

Working for part 2

Statement of Equivalent Units
		Material		Conversion Cost
	Units	Complete %	Equivalent units	Complete %	Equivalent units
Transferred	17,000	100%	17,000	100%	17,000
Closing WIP	5,000	100%	5,000	60%	3,000
Total	22,000	Total	22,000	Total	20,000

Cost per Equivalent Units
COST	Material	Conversion Cost	TOTAL
Beginning WIP Inventory Cost	$     10,480.00	$         15,258.00	$         25,738.00
Cost incurred during period	$     59,040.00	$         92,092.00	$       151,132.00
Total Cost to be accounted for	$     69,520.00	$       107,350.00	$       176,870.00
Total Equivalent Units	22,000	20,000
Cost per Equivalent Units	$           3.1600	$               5.3675

Statement of cost
Cost	Equivalent Cost/unit	Ending WIP		Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$   3.16000	5,000	$ 15,800.00	17,000	$   53,720.00
Conversion Cost	$ 5.36750	3,000	$ 16,102.50	17,000	$   91,247.50
		TOTAL	$ 31,902.50	TOTAL	$ 144,967.50