# Exercise 15: Cost assigned to work in process inventory

Learning objective:
This exercise illustrates the computation of cost assigned to work-in-process inventory under weighted average and FIFO method.

The manager of Delta Company is interested in knowing the work-in-process inventory figures. The relevant data is given below:

• Work in process beginning inventory:
16,000 units – 100% complete as to materials and 50% complete as to conversion costs
• Cost of beginning inventory:
materials 7,968; labor \$4,296; overhead \$4,296.
• Started in process:
40,000 units
• Cost added during the period:
materials \$48,000; labor \$39,936; overhead \$39,936.
• Completed and transferred out:
84,000 units
• Work in process ending inventory:
12,000 units – 100% complete as to materials and 60% complete as to conversion cost

Required: Compute the cost assigned to work-in-process ending inventory, assuming the company uses:

1. a weighted average method
2. a FIFO method

## Solution

### 1. Cost assigned to work in process inventory – weighted average method

#### Equivalent units in ending inventory:

Materials:
= 84,000 + 12,000
= 96,000 units

= 84,000 + 12,000 × 60%
= 84,000 + 7,200
= 91,200 units

#### Unit cost:

*Materials:
= (\$7,968 + \$48,000)/96,000 units
= \$0.583

**Labor:
= (\$4,296 + \$39,936)/91,200 units
= \$0.485

= (\$4,296 + \$39,936)/91,200 units
= \$0.485

### 2. Cos assigned to work in process inventory – FIFO method

#### Equivalent units in ending inventory

Materials:
= 84,000 – 16,000 + 12,000
= 80,000 units

= (84,000 – 16,000) + (16,000 × 50%) + (12,000 × 60%)
= 83,200 units

#### Units cost

*Materials:
= \$48,000/80,000 units
= \$0.60

**Labor:
= \$39,936/83,200 units
= \$0.48