Work-in-process refers to the costs incurred for a partially completed product; these costs are recorded in an inventory (asset) account. The following practice questions ask you to determine how work-in-process inventory is affected by production costs.
Practice questions
UnderStuff Clothing Company has the following costs during the month:
Cotton knit fabric added to production: $45,000
Sewing machine operators' wages: $30,000
Electricity to run the machines, cool the factory, and light the factory: $2,000
Factory manager's salary: $3,000
Elastic and thread used in making the garments: $1,500
Insurance on the factory: $200
CEO's salary: $40,000
Wages for the accounting department: $22,000
Advertising: $3,000
Depreciation on the sewing machines: $2,100
By how much will the Work-in-Process Inventory account increase as a result of these costs?
Purple Magic Pots has no Work-in-Process Inventory at the beginning or end of the year. The following costs are from the accounting records:
Clay used to form the pots: $157,300
Wages for the potters: $143,000
Salaries for the president, secretary, and billing clerk: $160,000
Electricity to run the wheels, kilns, lights, and cooling: $48,000
Utilities for the office: $3,600
Depreciation on office equipment: $1,300
Depreciation on the wheels and kilns: $3,000
Rent for the studio: $36,000
Rent for the business office: $12,000
Office expenses: $500
How much is transferred from Work-in-Process Inventory to Finished Goods Inventory?
Answers and explanations
$83,800
All manufacturing costs are added to the Work-in-Process Inventory account. That includes direct materials, direct labor, and overhead.
$387,300
All product costs, which include direct materials, direct labor, and overhead, are added to Work-in-Process Inventory. When the production process is complete, the costs are moved to the Finished Goods Inventory.
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