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Rene Alverez knew she was in over her head soon after she took the job. Even so, the opportunity for promotion comes along rarely and she believed that she would grow into it. Ms. Alverez is the cost accounting specialist assigned to the ?nishing department of Standard Tool Company. Bill Sawyer, the manager of the ?nishing department, knows exactly what he is doing. In each of the three years he has managed the department, the cost per unit of product transferred out of his Work in Process Inventory account has declined. His ability to control cost is highly valued, and it is widely believed that he will be the successor to the plant manager, who is being promoted to manufacturing vice president. One more good year would surely seal the deal for Mr. Sawyer. It was little wonder that Ms. Alverez was uncomfortable in challenging Mr. Sawyer's estimate of the percentage of completion of the department's ending inventory. He contended that the inventory was 60 percent complete, but she believed that it was only about 40 percent complete. After a brief altercation, Ms. Alverez agreed to sign off on Mr. Sawyer's estimate.
Problem 1: Compute the equivalent cost per unit, assuming the ending inventory is considered to be 40 percent complete.
Problem 2: Compete the equivalent cost per unit assuming the ending inventory is considered to be 60 percent complete.
Problem 3: Provide a summary of what the findings of these calculations mean.
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