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: 4,100 trusses $10,580 $15,358 18,100 trusses 17,100 trusses Work-in-process inventory, February 1 Direct materials: 100% complete Conversion: 40% complete Units started during February Units completed during February and transferred out Work-in-process inventory, February 29 Direct materials: 100% complete Conversion: 20% complete Costs incurred during February Direct materials Conversion $59, 140 $92,192 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.) Direct Materials Conversion 1-a. Cost per EU 1-6. Cost of goods completed and transferred out 1-c. Costs remaining in the WIP Inventory account 2. The weighted average cost per equivalent unit by 1

Answer 1

Answers

• Requirement [1a]

	Material	Conversion
Cost per Equivalent units	$                     3.1405	$                          5.9354

--Working

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	17,100	100%	17,100	100%	17,100
Units of ENDING WIP	5,100	100%	5,100	20%	1,020
Equivalent Units of Production			22,200		18,120
COST per EUP			Material		Conversion
Cost of Beginning WIP			$          10,580.00		$                                  15,358.00
Cost incurred during the period			$          59,140.00		$                                  92,192.00
Total Costs		Costs	$          69,720.00	Costs	$                               107,550.00
Equivalent units of production		EUP	22,200	EUP	18,120
Cost per EUP			$              3.14054		$                                      5.93543

• Requirement [1b] = $ 155,198

Cost of Units Transferred Out	EUP	Cost per EUP	Total Cost
- Direct Materials	17,100	$                      3.1405	$          53,702.55
- Conversion	17,100	$                      5.9354	$        101,495.34
Total Cost transferred Out				$            155,197.89

• Requirement [1c] = $ 22,071

Cost of ending WIP	EUP	Cost per EUP	Total Cost
- Direct Materials	5,100	$                      3.1405	$          16,016.55
- Conversion	1,020	$                      5.9354	$             6,054.11
Total cost of ending WIP				$              22,070.66

• Requirement 2

Weighted average cost per unit at 40% change = $5.7596
Weighted average cost per unit earlier = $ 9.0759

Hence,
Cost per unit DECREASES by $ 3.3163

--Working

	Material	Conversion
Cost per Equivalent units	$                     3.1405	$                          5.6191

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	17,100	100%	17,100	100%	17,100
Units of ENDING WIP	5,100	100%	5,100	40%	2,040
Equivalent Units of Production			22,200		19,140
COST per EUP			Material		Conversion
Cost of Beginning WIP			$          10,580.00		$                                  15,358.00
Cost incurred during the period			$          59,140.00		$                                  92,192.00
Total Costs		Costs	$          69,720.00	Costs	$                                107,550.00
Equivalent units of production		EUP	22,200	EUP	19,140
Cost per EUP			$              3.14054		$                                      5.61912