Mohawk Machining, which uses a process-costing system, adds material at the beginning of production and incurs conversion cost evenly throughout manufacturing.The following selected information was taken from the company's accounting records: Total equivalent units of materials: 8,000 Total equivalent units of conversion: 7,400 Units started and completed during the period: 6,500 On the basis of this information, the ending work-in-process inventory's stage of completion is:

Question

Quizplus · Accepted Answer

To calculate the stage of completion for the ending work-in-process inventory, we need to know the number of equivalent units in the ending inventory for both materials and conversion costs. We can calculate the number of equivalent units for materials by subtracting the equivalent units of materials used (which we don't know from the information given) from the total equivalent units of materials (8,000).

To calculate the equivalent units of conversion for the ending inventory, we need to know how much of the conversion costs are included in the ending inventory. Since conversion cost is incurred evenly throughout production, we can assume that half of the conversion costs for units started during the period are included in the ending inventory.

Units started and completed during the period = 6,500
Equivalent units of conversion for units started during the period = 6,500
Equivalent units of conversion for ending inventory = 0.5 * 6,500 = 3,250

Total equivalent units of conversion = 7,400
Equivalent units of conversion used = 7,400 - 3,250 = 4,150

Now we can calculate the stage of completion for the ending work-in-process inventory:

Stage of completion for materials: unknown
Stage of completion for conversion: (4,150 conversion units in ending inventory) / (7,400 total conversion units) = 0.56 or 56%

Since the company uses a process-costing system and adds materials at the beginning of production, we can assume that the materials added to production are fully complete. Therefore, the stage of completion for the ending work-in-process inventory is based solely on the conversion cost. We know that the stage of completion for conversion is 56%, and since there are no other factors affecting the stage of completion, we can conclude that the ending work-in-process inventory's stage of completion is 60% (closest answer choice).

Mohawk Machining, Which Uses a Process-Costing System, Adds Material at the Beginning