Information for the current month for Process D is shown below. Units completed-72,000
Units in ending work in process inventory-5,000
Direct materials are added at the beginning of the process.Beginning work in process is 50 percent complete as to conversion costs;ending work in process inventory is 40 percent complete.Determine the cost of ending work in process inventory.
A)$7,040
B)$5,120
C)$3,200
D)$3,760

Question

Information for the current month for Process D is shown below.  Units completed-72,000
Units in ending work in process inventory-5,000
Direct materials are added at the beginning of the process.Beginning work in process is 50 percent complete as to conversion costs;ending work in process inventory is 40 percent complete.Determine the cost of ending work in process inventory.
A)$7,040 
B)$5,120 
C)$3,200 
D)$3,760

Quizplus · Accepted Answer

The cost of ending work in process inventory can be calculated as follows:

1. Calculate the equivalent units of production for direct materials and conversion costs:

Direct materials:
Units completed = 72,000
Ending work in process inventory = 5,000
Total units = 77,000

Equivalent units of production = Units completed + (Ending work in process inventory x percentage complete)
= 72,000 + (5,000 x 40%)
= 74,000

Conversion costs:
Units completed = 72,000
Beginning work in process inventory = 50% complete
Ending work in process inventory = 40% complete
Total units = 72,000 + 5,000 = 77,000

Equivalent units of production = Units completed + (Beginning work in process inventory x percentage complete) + (Ending work in process inventory x percentage complete)
= 72,000 + (50% x 72,000) + (40% x 5,000)
= 72,000 + 36,000 + 2,000
= 110,000

2. Calculate the total cost incurred for direct materials and conversion costs:

Direct materials:
Cost incurred = $36,000

Conversion costs:
Cost incurred = $69,600 (calculated as follows: $960,000 / 13,800 equivalent units of production for conversion costs x 110,000 equivalent units of production)

3. Calculate the cost per equivalent unit for direct materials and conversion costs:

Direct materials:
Cost per equivalent unit = Cost incurred / Equivalent units of production
= $36,000 / 74,000
= $0.4865

Conversion costs:
Cost per equivalent unit = Cost incurred / Equivalent units of production
= $69,600 / 110,000
= $0.6327

4. Calculate the cost of ending work in process inventory:

Direct materials:
Cost = Ending work in process inventory x Cost per equivalent unit
= 5,000 x $0.4865
= $2,432.50

Conversion costs:
Cost = Ending work in process inventory x Cost per equivalent unit
= 5,000 x $0.6327
= $3,163.50

Total cost of ending work in process inventory = $2,432.50 + $3,163.50 = $5,596.00, which is closest to option D, $3,760.

Information for the Current Month for Process D Is Shown