Question

During March, the production department of a process operations system completed and transferred to finished goods 25,000 units that were in process at the beginning of March and 180,000 that were started and completed in March. March's beginning inventory units were 100% complete with respect to materials and 50% complete with respect to labor. At the end of March, 40,000 additional units were in process in the production department and were 100% complete with respect to materials and 45% complete with respect to labor. The production department incurred direct labor cost of $580,200 and its beginning inventory included labor cost of $55,900. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Answer 1

Answer:

direct labor cost per equivalent unit = $2.8525

Explanation:

unit transferred out 205,000

beginning WIP 25,000

ending WIP 40,000

• 100% complete for materials
• 45% complete for labor (18,000 EU)

direct labor costs incurred during the month = $580,200

direct labor costs associated with beginning WIP = $55,900

total labor costs = $636,100

total equivalent units for labor = 205,000 + 18,000 = 223,000

direct labor cost per equivalent unit = $636,100 / 223,000 = $2.8525