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: 4,400 trusses $10,880 $15,658 18,400 trusses 17,400 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 $59,440 $92,492 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 E 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 E 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-b. 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

Answer 1

Solution 1a to 1c:

Equivalent units of production (EUP) - FIFO method
	Units	%Material	EUP-Material	% Conversion	EUP- Conversion
Beginning units completed this period (A)	4400	0%	0	60%	2640
Units Started and Completed (450000-100000) (B)	13000	100%	13000	100%	13000
units of Ending work in process (D)	5400	100%	5400	20%	1080
Equivalent units of production (C+D)			18400		16720
Cost per EUP			Material		Conversion
Costs incurred this period (Total Costs)		Costs	$59,440	Costs	$92,492
/Equivalent units of Production		EUP	18400	EUP	16720
Cost per Equivalent unit of Production			$3.2304		$5.5318
Cost Assignment and Reconciliation
Beginning Inventory Cost:				$26,538
Cost to Complete Beginning Inventory	EUP	Cost per EUP	Total Cost
Direct materials	0	$3.2304	$0
Conversion	2640	$5.5318	$14,604
Total Cost to complete Beginning Inventory				$14,604
Total Costs of units in Beginning Inventory				$41,142
Cost of units started and completed	EUP	Cost per EUP	Total Cost
Direct Material	13000	$3.2304	$41,995
Conversion	13000	$5.5318	$71,913
Total Cost of units started and completed				$113,909
Total cost of units transferred out				$155,051
Cost of ending work in process	EUP	Cost per EUP	Total Cost
Direct Material	5400	$3.2304	$17,444
Conversion	1080	$5.5318	$5,974
Total Ending work in process				$23,419
Total Costs accounted for				$178,469

Equivalent units of production (EUP) - FIFO method
	Units	%Material	EUP-Material	% Conversion	EUP- Conversion
Beginning units completed this period (A)	4400	0%	0	60%	2640
Units Started and Completed (450000-100000) (B)	13000	100%	13000	100%	13000
units of Ending work in process (D)	5400	100%	5400	20%	1080
Equivalent units of production (C+D)			18400		16720
Cost per EUP			Material		Conversion
Costs incurred this period (Total Costs)		Costs	$59,440	Costs	$92,492
/Equivalent units of Production		EUP	18400	EUP	16720
Cost per Equivalent unit of Production			$3.2304		$5.5318
Cost Assignment and Reconciliation
Beginning Inventory Cost:				$26,538
Cost to Complete Beginning Inventory	EUP	Cost per EUP	Total Cost
Direct materials	0	$3.2304	$0
Conversion	2640	$5.5318	$14,604
Total Cost to complete Beginning Inventory				$14,604
Total Costs of units in Beginning Inventory				$41,142
Cost of units started and completed	EUP	Cost per EUP	Total Cost
Direct Material	13000	$3.2304	$41,995
Conversion	13000	$5.5318	$71,913
Total Cost of units started and completed				$113,909
Total cost of units transferred out				$155,051
Cost of ending work in process	EUP	Cost per EUP	Total Cost
Direct Material	5400	$3.2304	$17,444
Conversion	1080	$5.5318	$5,974
Total Ending work in process				$23,419
Total Costs accounted for				$178,469

Solution 2:

Equivalent units of production (EUP) - FIFO method
	Units	%Material	EUP-Material	% Conversion	EUP- Conversion
Beginning units completed this period (A)	4400	0%	0	60%	2640
Units Started and Completed (450000-100000) (B)	13000	100%	13000	100%	13000
units of Ending work in process (D)	5400	100%	5400	40%	2160
Equivalent units of production (C+D)			18400		17800
Cost per EUP			Material		Conversion
Costs incurred this period (Total Costs)		Costs	$59,440	Costs	$92,492
/Equivalent units of Production		EUP	18400	EUP	17800
Cost per Equivalent unit of Production			$3.2304		$5.1962

New per unit equivalent cost = $3.2304 + $5.1962 = $8.4266

Current per unit equivalent cost = $3.2304 + $5.5318 = $8.7622

Change in cost per equivalent unit = $8,7622 - $8.4266 = $0.3356

The weighted average cost per equivalent unit decreases by $0.3356