Question

Tim owns a woodworking business and uses normal costing. They are doing their end of the year calculations for their work in process inventory. Currently, they have cost of goods sold as $520,000, direct labor $92,000, direct material $83,000, finished goods $60,000, and an applied material overhead of $125,000. What is their work in process?

Answer 1

To determine the work in process for Tim's woodworking business, one must consider direct materials, direct labor, and applied manufacturing overhead. However, without the beginning or ending work in process figures, we cannot determine the exact WIP inventory. Therefore, an answer based on the provided figures alone is incomplete.

Step-by-step explanation:

To calculate the work in process (WIP) inventory for Tim's woodworking business, we need to understand what constitutes WIP. WIP inventory includes all the costs involved in the unfinished goods at the end of a period. These costs typically include direct materials, direct labor, and a portion of manufacturing overhead.

Using normal costing, we would begin with the cost of goods manufactured (COGM), which includes direct material, direct labor, and applied overhead. Then, we would adjust the beginning and any ending finished goods inventory to arrive at the cost of goods sold (COGS). Because this scenario doesn't provide the beginning WIP or the ending WIP explicitly, we can't calculate the exact WIP without these figures. However, using the provided figures,

• Cost of Goods Manufactured (COGM) would usually be calculated as Direct Materials + Direct Labor + Applied Overhead.
• Cost of Goods Sold (COGS) is adjusted from the COGM with any changes in the Finished Goods inventory, which is not detailed in the question.