Question

A company uses a process cost accounting system. its assembly department's beginning inventory consisted of 50,000 units, 3/4 complete with respect to direct labor and overhead. the department started and finished 127,500 units this period. the ending inventory consists of 40,000 units that are 1/4 complete with respect to direct labor and overhead. all direct materials are added at the beginning of the process. the department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is

Answer 1

Using the weighted average method, the equivalent units to be considered would only be that which is completed within the month and those completed in the ending inventory. Since the ending inventory is only ¼ or 25% completed, therefore the total equivalent units is:

total equivalent units = 127,500 units + (0.25)*40,000 units

total equivalent units = 137,500 units

 

Since the direct labor costs is given to be $24,000 therefore the direct labor cost per equivalent unit is:

direct labor cost per equivalent unit = $24,000 / 137,500 units

direct labor cost per equivalent unit = $0.1745 

direct labor cost per equivalent unit = $0.17

 

Answer:

$0.17