Smith Company reports the following information: Cost of goods manufactured $68,250 Direct materials used 27,000 Direct labor incurred 25,000 Work in process inventory, January 1 11,000 Factory overhead is 75% of the cost of direct labor. Work in process inventory on December 31 is a.$8,500 b.$16,250 c.$13,500 d.$18,750

Smith Company

Work in process inventory on December 31 is:

= c. $13,500.

Explanation:

a) Data and Calculations:

Work in process inventory, January 1   11,000

Direct materials used                           27,000

Direct labor incurred                           25,000

Factory overhead (75% of $25,000)   18,750

Total cost for the year =                   $ 81,750

Cost of goods manufactured            68,250

Work in process inventory, Dec. 31 $13,500

b) Smith's work in process inventory on December 31 equals its total costs incurred by Smith for production for the year minus its cost of goods manufactured.  Conversely, if the work in process inventory on December 31 is known, then its cost of goods manufactured equals its total production costs minus the ending work in process.

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