ECONOMICS

Detailed explanation-1: -To calculate the WIP precisely, you would have to count each inventory item and determine the valuation accordingly manually. Fortunately, you can use the work-in-process formula to determine an accurate estimate. It is: Beginning WIP Inventory + Manufacturing Costs – COGM = Ending WIP Inventory.

Detailed explanation-2: -Work in process inventory is an asset The ending work in process inventory is simply the cost of partially completed work as of the end of the accounting period. Ending WIP is listed on the company’s balance sheet along with amounts for raw materials and finished goods.

Detailed explanation-3: -If the ending work in process inventory is greater than the beginning work in process inventory, then the cost of goods manufactured will be less than total manufacturing costs for the period. Finished goods inventory for a manufacturing company is equivalent to merchandise inventory for a merchandising company.

Detailed explanation-4: -COGM = Beginning WIP inventory + total manufacturing costs-ending WIP inventory. To find the total manufacturing costs, add direct materials, labour, and other overhead manufacturing costs.