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 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. (Round your answer to 4 decimal places.) 1-c. Costs remaining in the Work-in-Process Inventory account. (Round your answer to 4 decimal places.) 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

		Physical Units
	UNITS TO BE ACCOUNTED FOR:
	Inventory in process, February 1	4000
	Started during February	18000
	Total Units to be accounted for	22000
	UNITS ACCOUNTED FOR:		Equivalent Units
			Direct Materials	Conversion Cost
	Inventory in process, February 1	4000	0	3200
	Started and completed in February	13000	13000	13000
	Completed and transferred out in February	17000	13000	16200
	Inventory in process, February 29	5000	5000	2000
	Units accounted for	22000	18000	18200
	COST INFORMATION:
	COSTS TO ACCOUNT FOR:		Direct Materials	Conversion Cost	Total Cost
	Inventory in process, February 1		$        10,480	$      15,258	$      25,738
	Costs added in February		$        59,040	$      92,092	$ 1,51,132
	Total costs to account for		$        69,520	$ 1,07,350	$ 1,76,870
	Costs added in February		$        59,040	$      92,092	$ 1,51,132
	Total equivalent units		18000	18200
1-a)	Cost per equivalent unit		$            3.28	$          5.06	$          8.34
	COSTS ASSIGNED TO PRODUCTION:
	Inventory in process, February 1		$        10,480	$      15,258	$      25,738
	Costs to complete		$                 -	$      16,192	$      16,192
	Total costs of beginning inventory completed		$        10,480	$      31,450	$      41,930
	Started and completed in February		$        42,640	$      65,780	$ 1,08,420
1-b)	Transferred to finished goods in February		$        53,120	$      97,230	$ 1,50,350
1-c)	Inventory in process, February 29		$        16,400	$      10,120	$      26,520
	Total costs assigned		$        69,520	$ 1,07,350	$ 1,76,870
2)	The unit equivalent cost would decrease by 8.34-8.08 =		$                 -	$          0.26	$          0.26
	UNITS ACCOUNTED FOR:		Equivalent Units
			Direct Materials	Conversion Cost
	Inventory in process, February 1	4000	0	3200
	Started and completed in February	13000	13000	13000
	Completed and transferred out in February	17000	13000	16200
	Inventory in process, February 29	5000	5000	3000
	Units accounted for	22000	18000	19200
	COST INFORMATION:
	COSTS TO ACCOUNT FOR:		Direct Materials	Conversion Cost	Total Cost
	Inventory in process, February 1		$        10,480	$      15,258	$      25,738
	Costs added in February		$        59,040	$      92,092	$ 1,51,132
	Total costs to account for		$        69,520	$ 1,07,350	$ 1,76,870
	Costs added in February		$        59,040	$      92,092	$ 1,51,132
	Total equivalent units		18000	19200
	Cost per equivalent unit		$            3.28	$          4.80	$          8.08