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		3,100	trusses
Direct materials: 100% complete	$	10,580
Conversion: 20% complete	$	15,358
Units started during February		18,100	trusses
Units completed during February and transferred out		17,100	trusses
Work-in-process inventory, February 29
Direct materials: 100% complete
Conversion: 40% complete
Costs incurred during February
Direct materials	$	59,140
Conversion	$	92,192

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 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

Answer: WORKINGS:-

Units to be Accounted for	Physical Units
WIP, February 1	3,100
Started during February	18,100
Total Units to be Accounted for	21,200

Computation of Equivalent Units:-

FIFO METHOD	Physical Units	Direct Materials	Conversion Cost
%	Units	%	Units
WIP, February 1	3,100	0%	0	80%	2,480
Started and Completed	17,100	100%	17,100	100%	17,100
WIP, February 29	1,000	100%	1,000	40%	400
TOTAL UNITS ACCOUNTED FOR	21,200		18,100		19,980

COST INFORMATION:-

COST TO ACCOUNT FOR	Direct Materials	Conversion Cost	Total Cost
WIP, February 1	$10,580	$15,358	$25,938
Incurred during February	$59,140	$92,198	$151,338
TOTAL	$69,720	$107,556	177,276

REQUIRED

1-a.) Cost per Equivalent Unit

	Direct Materials	Conversion Cost
Cost Incurred in February	$59,140	$92,198
Total Equivalent Units	18,100	19,980
Cost per Equivalent Unit	$3.2674	$4.6145

1-b.) Cost of goods completed and transferred out

Cost assigned to Production	Direct Materials	Conversion Cost	Total
WIP, February1	$10,580	$15,358	$25,938
Costs to complete	-	$11,443.96	$11,443.96
Total costs of beginning inventory completed	$10,580	$26,801.96	$37381.96
Started and completed in February	$55,872.54	$78,907.95	$134,780.49
Cost of goods completed and transferred out	$66,452.54	$105,709.91	$172,162.45

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

	Direct Materials	Conversion Cost	Total
WIP, February29	$3,267.4	$1,845.8	$5,122.20
Cost of goods completed and transferred out	$66,452.54	$105,709.91	$172,162.45
Costs remaining in the Work-in-Process Inventory account	$69,728.94	$107,555.71	$177,284.65

2.) The unit equivalent cost would decrease by $7.8819 - $7.8362 = $0.0457

Explanation:

FIFO METHOD	Physical Units	Direct Materials	Conversion Cost
%	Units	%	Units
WIP, February 1	3,100	0%	0	80%	2,480
Started and Completed	17,100	100%	17,100	100%	17,100
WIP, February 29	1,000	100%	1,000	60%	600
TOTAL UNITS ACCOUNTED FOR	21,200		18,100		20,180

COST INFORMATION:-

COST TO ACCOUNT FOR	Direct Materials	Conversion Cost	Total Cost
WIP, February 1	$10,580	$15,358	$25,938
Incurred during February	$59,140	$92,198	$151,338
TOTAL	$69,720	$107,556	177,276
Incurred during February	$59,140	$92,198	$151,338
Total Equivalent Units	18,100	20,180
Cost per equivalent unit	$3.2674	$4.5688	$7.8362

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