# CMA Study Group

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## WIP QUESTION

• #### 1.  WIP QUESTION

Posted 06-09-2022 01:40 AM
Dear Friends,

I couldnt find the right solution ...

Fact Pattern: Superb Hancock Company uses a process costing system in which all materials are added at the beginning of the first process. Conversion costs are added evenly throughout the process. During the past month, 10,000 units were started in production, and 8,000 were completed and transferred to the next department. There were no beginning inventories. The ending inventories were 70% complete at the end of the month. The company uses a weighted-average method for inventory valuation.
If Superb Hancock's materials used in production cost \$15,000 and its conversion costs incurred were \$25,000, what is the value (rounded) of the ending work-in-process inventory in the first processing department?

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TIMUCIN ONER
Director/Manager
ANTALYA
Turkey
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• #### 2.  RE: WIP QUESTION

Posted 06-10-2022 02:00 AM
Hi Timucin,

See below the suggested solution for the given problem:

 Direct Materials Conversion Costs Beginning WIP - Units started 10,000 Units to account for 10,000 Beginning WIP - Units Started & Completed 8,000 Units Completed 8,000 8,000 8,000 Ending WIP 2,000 2,000 1,400 (2000 * 70%) Unites accounted for (A) 10,000 10,000 9,400 Cost incurred (B) \$        15,000.00 \$         25,000.00 Cost per EUP (B/A) \$                 1.50 \$                  2.66 Ending WIP: Direct materials : (2,000 units * \$1.50) \$3,000.00 Conversion costs: (1,400 * \$2.66) \$3,724.00 Cost of Ending WIP \$6,724.00

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Accountant
Dubai
United Arab Emirates
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• #### 3.  RE: WIP QUESTION

Posted 06-10-2022 02:36 AM
Dear Jhon,

Thank you for your support. Everything is fine till calculating E/I .  I am struggling to understand why we multiply D/M with 2.000 units instead of 1.400 units? I would much appreciate if you can tell me the logic?

Regards

 Direct materials : (2,000 units * \$1.50) \$3,000.00 Conversion costs: (1,400 * \$2.66) \$3,724.00 Cost of Ending WIP \$6,724.00

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TIMUCIN ONER
Director/Manager
ANTALYA
Turkey
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• #### 4.  RE: WIP QUESTION

Posted 06-10-2022 05:33 AM
Hi,

Ending inventory is 70% completed as to conversion cost, and in this problem it is presumed ending WIP is 100% complete as to Direct Materials. so for D/M, it is complete 100%, 2,000 units, while the conversion is 70% only, 1,400 units.

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