Question

A company uses a process cost accounting system. The following information is available regarding direct labor for the current year: Picture (a) Calculate the equivalent units of production for direct labor for the year using weighted average. (b) Calculate the average cost per equival

Answer 1

Question:

A company uses a process cost accounting system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year:

goods in process, January 1 5,500 units 80% complete

goods in process December 31 8,800 units, 40 complete

units completed and transferred 46,900 units

to finished goods

direct labor costs during the year $266,300

(a) Calculate the equivalent units of production for direct labor for the year.

(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

Answer:

Total equivalent unit= 41,040  units

Cost per equivalent units=$ 6.48

Explanation:

Equivalent units

Item                                      Units                   Equivalent unit

Transferred out                46900× 80%  =   37,520

Closing inventory               8,800 × 40% =     3,520

Total equivalent unit                                        41,040

Cost per equivalent units

Cost per equivalent units = Total labour cost/ total equivalent unit

                                       =  $266,300 / 41,040 units =$ 6.5                      

Cost per equivalent units=$ 6.5