Question

Domkowski began operations on January 1 of the current year. The company uses a process-costing system, and conversion cost is incurred evenly throughout manufacturing. By January 31, the firm had completed 56,000 units. Which of the following statements is true about the ending work-in-process inventory if equivalent units for conversion cost totaled 59,000 units?

a) There is no ending work-in-process inventory.
b) The ending work-in-process inventory totaled 3,000 physical units.
c) The ending work-in-process inventory of 10,000 physical units was 30% complete.
d) The ending work-in-process inventory of 20,000 physical units was 85% complete.

Answer 1

Domkowski

The statement that is true about the ending work-in-process inventory is, if equivalent units for conversion cost totaled 59,000 units:

c) The ending work-in-process inventory of 10,000 physical units was 30% complete.

Step-by-step explanation:

a) Data and Calculations:

Units started and completed during the current period = 56,000 units

Total equivalent units of production = 59,000 units

Therefore, the ending units inventory = 3,000 (59,000 - 56,000) units.

Since the 3,000 units are equivalent units and still in process, this implies that many more units are attributable to the ending inventory. The nearest explanation is that there are 10,000 units under process and only 30% complete. This results in having 3,000 units (10,000 * 30%) as the ending work-in-process.