Question:
A company uses a process cost accounting system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year:
goods in process, January 1 5,500 units 80% complete
goods in process December 31 8,800 units, 40 complete
units completed and transferred 46,900 units
to finished goods
direct labor costs during the year $266,300
(a) Calculate the equivalent units of production for direct labor for the year.
(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).
Answer:
Total equivalent unit= 41,040 units
Cost per equivalent units=$ 6.48
Explanation:
Equivalent units
Item Units Equivalent unit
Transferred out 46900× 80% = 37,520
Closing inventory 8,800 × 40% = 3,520
Total equivalent unit 41,040
Cost per equivalent units
Cost per equivalent units = Total labour cost/ total equivalent unit
= $266,300 / 41,040 units =$ 6.5
Cost per equivalent units=$ 6.5
