Question

A company uses the FIFO method for inventory costing. At the start of the period the production department had 20,000 units in beginning Work in Process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending Work in Process inventory and are 75% complete. The production department had labor costs in the beginning goods is process inventory of $99,000 and total labor costs added during the period are $726,825. Compute the equivalent cost per unit for labor.

Answer 1

Answer:

equivalent cost per unit for labor: $4.1982

Explanation:

complete and transferred    165,000

work on ending WIP               16,500  //   22,000 x 75%

previous work on beginning (8,000) //  20,000 x 40%

Equivalent units                   173,500

labor cost added during the period 726,825

equivalent cost 726,825/173,500 = 4.198193084

equivalent cost per unit for labor: $4.1982