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2. On average, the firm has 10 weeks of work in process (WIP) on hand. Annual...

2. On average, the firm has 10 weeks of work in process (WIP) on hand.

Annual cost of goods sold (COGS) is $15 million. If the company works 50 weeks a year, the:

What is the dollar Value of Work in Process(WIP)? Hint: Annual cost of COGS/ work weeks = the cost of one week of WIP. You are trying to figure out how much the cost of the WIP they are carrying at any moment is. They carry about 10 weeks on hand.

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Answer #1

Cost of one week of WIP = Annual cost of COGS / No. of weeks

= 15 million / 50 = 0.3 million.

Cost of WIP carried = 10 x cost of one week of WIP = 10x0.3 = 3 million.

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