Question

During January, the production department of a process operations system completed and transferred to finished goods a total of 78,000 units. At the end of January, 9,000 additional units were in process in the production department and were 65% complete with respect to labor. The beginning inventory included labor cost of $21,650 and the production department incurred direct labor cost of $290,000 during January. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Answer 1

Answer:

$ 3.7167

Explanation:

Given:

Number of goods completed and finished = 78,000 units

Additional units produced = 9000

Number of units completed from the additional units = 65% of the units produced

i.e 0.65 × 9000 = 5,850 units

therefore, the total units completed = 78,000 + 5,850 = 83,850 units

Labor cost for the beginning inventory = $ 21,650

Direct labor cost = $ 290,000

Therefore, the total labor cost = $ 21,650 + $ 290,000 = $ 311,650

thus,

Direct Labor Cost per Unit  = ( Total labor cost ) / ( Total completed Units )

or

Direct Labor Cost per Unit  = $ 311,650 / 83,850 = $ 3.7167 / unit

Hence,

the direct labor cost per equivalent unit for the department = $ 3.7167