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

  1. 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?

  2. 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

  1. $83,800

    All manufacturing costs are added to the Work-in-Process Inventory account. That includes direct materials, direct labor, and overhead.

  2. $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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About This Article

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About the book authors:

Kenneth Boyd is the owner of St. Louis Test Preparation ( He provides online tutoring in accounting and finance. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. He is the author of CPA Exam For Dummies. Kate Mooney has been teaching accounting to both undergraduates and MBA students at St. Cloud State University since 1986, after earning her PhD from Texas A & M University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy.

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