Question

Timing Technology, Inc. manufactures timing devices. During 20x1, 1,500,000 units were completed and transferred to finished-goods inventory. On December 31, 20x1, there were 320,000 units in work in process. These units were 49 percent complete as to conversion and 100 percent complete as to direct material. Finished-goods inventory consisted of 450,000 units. Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 100 percent of direct-labor costs. There was no finished-goods inventory on January 1, 20x1. A review of the inventory cost records disclosed the following information:

Units Materials Labor
Work in process, January 1, 20x1 310,000 $310,000 $315,400
(84% complete as to conversion)
Units started in production 1,510,000
Direct-material costs $2,966,000
Direct-labor costs $2,998,200

Required:
Complete the following schedule as of December 31, 20x1, to compute the cost of work-in-process inventory.

Physical Units

Total units to account for 0


Total units to account for 0

Answer 1

The cost of work-in-process inventory as of December 31, 20x1 is:

= $368,998.40

Physical units:

For materials = 320,000 units

For conversion = 156,800 units

Step-by-step explanation:

a) Data and Calculations:

Units Materials Labor

Work in process, January 1, 20x1 310,000 $310,000 $315,400

(84% complete as to conversion)

Units started in production 1,510,000 1,510,000 1,510,000

Direct-material costs $2,966,000

Direct-labor costs $2,998,200

Total costs $3,276,000 $3,313,600

Units started in production 1,510,000 1,510,000 1,510,000

Work in process, December 31, 20x1 320,000 320,000 156,800

Total equivalent units 1,830,000 1,666,800

Costs per equivalent unit $1.79 $1.988

Cost of Ending WIP = $ (320,000 *$1.79 + 156,800*$1.988)

= $57,280 for materials + $311,718.40 for materials

= $368,998.40

b) The weighted average method was used to calculate the equivalent units. With this method, the beginning units of work-in-process are not part of the calculation (only the units started and completed and the ending work-in-process are). However, the costs of the beginning work-in-process form part of the calculation together with the cost of units started and completed during the current period.