Strap Company uses the weighted-average method in its process costing system. The company has only one processing department. The ending work in process inventory consists of 10,000 units, 60% complete with respect to materials. The total dollar value of this inventory is $38,000. The costs per equivalent unit are $5.00 for materials and $4.00 for conversion costs for the period. With respect to conversion costs, the ending work in process inventory is:
A) 10% complete
B) 20% complete
C) 38% complete
D) 30% complete

Question

Quizplus · Accepted Answer

To calculate the percentage of completion for conversion costs, we need to use the following formula:

Costs per equivalent unit for conversion x Percentage of completion for conversion costs

We know that the costs per equivalent unit for conversion costs are $4.00. We don't know the percentage of completion for conversion costs, but we do know the percentage of completion for materials, which is 60%. Since the inventory is 100% complete overall (it's the ending work in process), we can calculate the percentage of completion for conversion costs as follows:

100% complete - 60% complete for materials = 40% complete for conversion costs

Now we can use the formula to find the dollar value of the ending work in process inventory that relates to conversion costs:

$38,000 x 40% = $15,200

This means that the ending work in process inventory is $15,200 worth and is 20% complete with respect to conversion costs ($15,200 divided by $4.00 per equivalent unit for conversion costs). Therefore, the answer is B.

Strap Company Uses the Weighted-Average Method in Its Process Costing