Covington Corporation uses a process-cost accounting system. The company adds direct materials at the start of its production process; conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?
A) Materials, 40%; conversion cost, 40%.
B) Materials, 40%; conversion cost, 100%.
C) Materials, 100%; conversion cost, 40%.
D) Materials, 100%; conversion cost, 60%.
E) Materials, 100%; conversion cost, 100%.

Question

Quizplus · Accepted Answer

Since materials are added at the start of the production process, they are 100% complete in the ending work-in-process inventory. Conversion costs are incurred evenly throughout, so for the ending inventory that is 40% complete, the conversion costs would be 40% complete as well.

Covington Corporation Uses a Process-Cost Accounting System