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 completed and transferred out 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

Direct Labour Cost per Equivalent Unit = $0.17

Step-by-step explanation:

Cost per Equivalent Unit = Total Cost / Total Equivalent Units

Total Direct Labor Cost = $24,000

Total Equivalent Units = 127,500 + 40,000 x 25% = 137,000

Cost per Equivalent Unit = $24,000 / 137,500 = $0.17

Remember:

In the weighted average method, the units in beginning inventory are treated as if they had no work done in them at all. They are included with all the other units completed in the period.