Work-in-Process Inventory — Practice Questions

By Kenneth Boyd, Kate Mooney

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.

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  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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