With this Work In Process calculator, you can easily calculate your work-in-process inventory according to the latest formula. This calculator helps you to determine the WIP cost per unit based on raw material, labor, and overhead cost per unit and their percentage used.
In step one, enter the required values to calculate the WIP cost per unit which is required to calculate total work-in-process cost.
In step two, enter the yearly projected level in units, WIP period, and total period in days/weeks/months. If the work-in-process period is measured in days, ensure that the total period is also expressed in days.
What is Work-In-Process?
Work in Process (WIP) Inventory refers to the items in a production process that are not yet completed. These goods are in the intermediate stages of production but are not yet ready to be sold to customers as finished goods. WIP includes raw materials, direct labor, and manufacturing overhead costs incurred for producing these partially finished goods.
Components of Work in Process
Work-in-process inventory typically includes:
- Raw Materials: The cost of materials that have started the production process.
- Direct Labor: The labor costs for workers involved in producing the goods.
- Manufacturing Overheads: Indirect costs such as utilities, rent, and machinery depreciation are used in production.
Importance of Work-In-Process in Working Capital Forecast
Work in process is a key element in the current assets of the statement of working capital forecast, which makes it a crucial element of the working capital. We know that working capital is the difference between current assets and current liabilities which is prepared by following some specific guidelines. WIP is included in the calculation of current assets because it represents a future economic benefit expected to be realized within the operating cycle.
To avoid liquidity issues while running our business we must have to prepare the statement of working capital forecast while WIP is a key element. It also has a positive impact on the cash flow statement.
How to Calculate Work-In-Process Inventory?
We have a formula to calculate the work-in-process in inventory management. The simple formula is:
WIP = (Yearly Production in Units × Cost of Work In Process per unit × Work In Process Period) divided by the Total Period.
How to Calculate Beginning Work In Process Inventory?
The calculation of the Beginning Work in Process (WIP) Inventory typically involves using the Ending WIP Inventory from the previous period. The formula for calculating the Beginning WIP Inventory is:
Beginning WIP Inventory = Ending WIP Inventory + Total Manufacturing Costs − Cost of Goods Manufactured
If you don’t have the Ending WIP Inventory value, you might need to derive it based on the production data available or from historical records.
How to Calculate Ending Work In Process in Inventory Management?
Similar to the beginning WIP formula, we can calculate the ending WIP only by replacing the “Ending” with the “beginning”. To calculate the Ending Work In Process (WIP) inventory in inventory management, you can use the following formula:
Ending WIP = Beginning WIP + Total Manufacturing Costs − Cost of Goods Manufactured (COGM)
If you don’t have the COGM, it can be calculated using the formula below:
COGM = Beginning WIP + Total Manufacturing Costs − Ending WIP
Ending WIP is typically measured at the end of an accounting period (monthly, quarterly, or yearly).
If you have any questions about the Work In Process Calculator, let us know in the comment section below.