Ashley Corporation uses a process-cost accounting system. The company adds direct materials and direct labor at the start of its production process; overhead cost is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?
A) Materials, 100%; labor, 100%; overhead cost, 40%.
B) Materials, 100%; labor, 100%; overhead cost, 100%.
C) Materials, 100%; labor 40%; overhead cost, 40%.
D) Materials, 40%; labor, 40%; overhead cost, 60%.
E) Materials, 40%; labor, 40%; overhead cost, 100%.

Question

Quizplus · Accepted Answer

Since materials and labor are added at the start, they are 100% complete for units in ending work-in-process, while overhead is incurred evenly, making it 40% complete for these units.

Ashley Corporation Uses a Process-Cost Accounting System