Strap Company uses the weighted-average method in its process costing system.The company has only one processing department.The ending work in process inventory consists of 10,000 units,60% complete with respect to materials.The total dollar value of this inventory is $38,000.The costs per equivalent unit are $5.00 for materials and $4.00 for conversion costs for the period.With respect to conversion costs,the ending work in process inventory is?
A) 10% complete.
B) 20% complete.
C) 30% complete.
D) 38% complete.

Question

Quizplus · Accepted Answer

Since the ending work in process inventory is 60% complete with respect to materials and the total dollar value of the inventory is $38,000, the cost of the materials in the inventory is $38,000 * 60% = $22,800. Thus, the cost of the conversion costs in the inventory is $38,000 - $22,800 = $15,200.

To find out the equivalent units with respect to conversion costs, we need to use the following formula:

Equivalent units = Units in ending work in process inventory x Percentage complete

Equivalent units = 10,000 units x Percentage complete

Since the cost per equivalent unit for conversion costs for the period is $4.00, we can use the following formula to find out the percentage complete:

Percentage complete = Cost of ending work in process inventory (conversion costs) / (Equivalent units x Cost per equivalent unit)

Percentage complete = $15,200 / (10,000 units x $4.00) = 0.38 or 38%

Therefore, the ending work in process inventory is 38% complete with respect to conversion costs. The best choice is B.

Strap Company Uses the Weighted-Average Method in Its Process Costing