Question

A company operates a process costing system. The work-in-process account for last month is given below:
Work in Process Account
Opening work in process	0	Closing work in process	144,000
Manufacturing costs incurred during the month	624,000	Cost of goods manufactured	480,000

The company finished producing 12,000 units and 4,000 incomplete units were still in process at the end of the month. The closing work in progress was complete to the same degree for materials and conversion costs. What was the percentage degree of completion of the closing work-in-progress?

Answer 1

Answer:

Percentage degree of completion of the closing work-in-progress

90%

Calculation:

We need to calculate the percentage degree of completion of the closing work-in-progress.

Details provided are,

Closing work in process = 144,000

And the incomplete units respective to that is = 4,000 units

Cost of goods manufactured = 480,000

And the finished units respective to that is = 12,000 units

First we need to calculate the Cost per equivalent unit. For that we need to divide the Cost of goods manufactured with the units finished producing

Cost per equivalent unit = Cost of goods manufactured / Units Manufactured = 144,000 / 12,000 = 40

Then we need to divide the Closing work in process with the Cost per equivalent unit. And then divide the result with the incomplete units.

Degree of completion = (Closing work in process /  Cost per equivalent unit) / Number of closing work-in-progress units = (144,000 / 40) / 4,000 units = 90%