Question

A company uses a process costing system. Its Assembly Department's beginning inventory consisted of 30,000 units, 75% complete with respect to direct labor and overhead. The direct labor beginning inventory costs were $9,000. The department completed and transferred out 127,500 units this period. The ending inventory consists of 20,000 units that are 25% 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

Answer:

The direct labor cost per equivalent unit (rounded to the nearest cent) is $ 0.25

Explanation:

The Concept of Equivalent Units measures unit output in terms of percentage completion of inputs added into the process.

Calculation of Total Labor cost for the Assembly Department

Beginning inventory costs were    $9,000

Incurred during the period           $24,000

Total Labor Costs                           $33,000

Calculation of Total Equivalent units in respect of Labor Cost in Assembly Department

The ending inventory consists of 20,000×25% =  5,000

Completed and transferred out 127,500×100% = 127,500

Total Equivalent units                                              132,500

Calculation of  cost per equivalent unit of Labor Cost in Assembly Department

cost per equivalent unit =  Total Labor cost / Total Equivalent units

                                          = $33,000/ 132,500

                                          = $0.249056603

                                          =$0.25