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. Costs per equivalent unit.
2. Cost of goods completed and transferred out.
3. Cost remaining in the ending work-in-process inventory.

Answer 1

Answer:

Part 1

M = $3.28

C = $5.06

Part 2

$141,780

Part 3

$26,520

Explanation:

1. Costs per equivalent unit.

Step 1 ; Equivalent units

Materials = 4,000 x 0 % + 13,000 x 100 % + 5,000 x 100 % = 18,000 units

Conversion Costs = 4,000 x 80 % + 13,000 x 100 % + 5,000 x 40 % = 18,200 units

Step 2 : Cost per Equivalent units

Materials = $59,040 / 18,000 units = $3.28

Conversion Costs = $92,092 / 18,200 units = $5.06

Total = $3.28 + $5.06 = $8.34

2. Cost of goods completed and transferred out.

Cost of goods completed and transferred out = 17,000 trusses x $8.34 = $141,780

3. Cost remaining in the ending work-in-process inventory.

Ending work-in-process inventory = $3.28 x 5,000 + $5.06 x 2,000 = $26,520