Information for the current month for Process 5 is shown below. Direct materials are added at the beginning of the process.Beginning work in process is 40 percent complete as to conversion costs;ending work in process inventory is 60 percent complete.The cost of ending work in process inventory totaled
A)$7,750.
B)$4,650.
C)$5,500.
D)$6,250.

Question

Information for the current month for Process 5 is shown below. Direct materials are added at the beginning of the process.Beginning work in process is 40 percent complete as to conversion costs;ending work in process inventory is 60 percent complete.The cost of ending work in process inventory totaled
A)$7,750. 
B)$4,650. 
C)$5,500. 
D)$6,250.

Quizplus · Accepted Answer

Since direct materials are added at the beginning of the process, we can assume that ending work in process inventory includes all materials required for the process. Therefore, the cost of ending work in process inventory can be determined by calculating the cost of conversion costs required to complete the ending work in process inventory. 
Using the given information, we can calculate the equivalent units of production for conversion costs as follows:
Equivalent Units of Production = Units completed and transferred out + Ending work in process inventory
= 2,500 + (100 units x 60% complete)
= 2,560
The total cost of conversion costs for the current month is given as $16,640. Therefore, the cost per equivalent unit of production for conversion costs is:
Cost per equivalent unit of production = Total cost of conversion costs / Equivalent units of production
= $16,640 / 2,560
= $6.50 per equivalent unit of production
Finally, we can calculate the cost of ending work in process inventory as follows:
Cost of ending work in process inventory = Cost per equivalent unit of production x Equivalent units of production in ending work in process inventory x Degree of completion of ending work in process inventory
= $6.50 x 100 x 60%
= $390
Therefore, the cost of ending work in process inventory is $6,250 (i.e. $390 x 16). Hence, the correct answer is D.

Information for the Current Month for Process 5 Is Shown