WIP Inventory Valuation Worksheet
Work in process is the inventory balance that is hardest to defend at audit. This worksheet values open jobs using a standard cost split between material and conversion, with a separate percent complete for each, so the logic is visible and reconcilable.
| Job or work order | Part | Qty in WIP | Std material per unit | Std conversion per unit | Material % issued (%) | Conversion % complete (%) | Material value | Conversion value | WIP value | |
|---|---|---|---|---|---|---|---|---|---|---|
$7,680 | $1,824 | $9,504 | ||||||||
$7,400 | $2,860 | $10,260 | ||||||||
$4,368 | $1,088 | $5,456 | ||||||||
$6,150 | $1,238 | $7,388 | ||||||||
$5,100 | $2,835 | $7,935 |
Material is usually issued at the start of the operation, so material percent is often 100 even when little conversion has occurred. Percent complete should come from routing progress or reported operations, not guesswork. Reconcile the total to the WIP general ledger account.
WIP report that ties to the ledger
Optional: we can outline a read-only WIP reconciliation view over your ERP work order data.
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How to use the worksheet
List every open job at period end with its quantity in process. Enter standard material cost per unit and standard conversion cost per unit, which is labor plus applied overhead from the routing. Then enter how much material has been issued and how far conversion has progressed, each as a percentage. The sheet computes material, conversion and total WIP value per job and in total. Compare the total with the WIP account in the general ledger and investigate the difference.
- Include all released and in-progress work orders, not just those with recent activity
- Take percent complete from the last reported operation on the routing
- Remove jobs that are physically complete but not yet closed
- Flag jobs open far beyond normal lead time
The method behind it
This follows the equivalent units idea from process and job costing: material and conversion are tracked separately because they enter at different points. WIP value = quantity x standard material x material percent + quantity x standard conversion x conversion percent. If material is added at the start, use 100 percent for material from the first operation. Actual-cost systems accumulate real issues and labor on the job instead, and WIP is the accumulated balance rather than an estimate.
Reading the result
A high conversion share suggests many jobs are far along, so a lot of labor and overhead is capitalized. If that share is high and the jobs are old, you may be carrying costs that will not be recovered. Compare worksheet WIP to the ledger: a worksheet higher than the ledger can mean unposted labor, a lower one often means stale jobs, scrap not written off or issues without a work order. Sorting by value shows where review time matters most.
Common mistakes and ERP notes
Counting completed units as WIP, forgetting scrap and rework cost, and applying overhead at a rate that has not been refreshed. Estimating percent complete from elapsed time rather than routing steps is another common error. In SAP the production order WIP is calculated in the settlement run (CO88 for WIP calculation, as an example), in Oracle EBS the WIP accounting class drives the accounts, and in SyteLine, Epicor and NetSuite the job or work order accumulates costs until close. Reconcile each month before the books close.
Frequently Asked Questions
Why track material and conversion separately?
Because they enter production at different times. Material is often issued up front while labor and overhead accrue gradually. Treating them together overstates or understates WIP when jobs are early or late in routing.
How do I estimate percent complete?
Use the share of routing standard hours or operations completed, weighted by cost if possible. Avoid estimating from the calendar. Reported shop floor transactions are the best evidence.
What if WIP does not match the general ledger?
List possible causes: unposted labor, material issued to the wrong order, completed orders still open, scrap not recorded, and variances not yet settled. Investigate the largest jobs first.
Should abnormal scrap be in WIP?
Abnormal scrap and idle capacity are generally expensed when incurred, not capitalized into inventory. Normal scrap is part of the cost of production. Check your accounting policy and auditor expectations.
A monthly WIP report that ties out to the ledger without manual cleanup is achievable from ERP data. We can outline the approach for your system. Ask for an expert review.
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