Question

During March, the production department of a process operations system completed and transferred to finished goods 25,000 units that were in process at the beginning of March and 110,000 that were started and completed in March. March's beginning inventory units were 100% complete with respect to materials and 55% complete with respect to labor. At the end of March, 30,000 additional units were in process in the production department and were 100% complete with respect to materials and 30% complete with respect to labor. The production department incurred direct labor cost of $578,900 and its beginning inventory included labor cost of $54,700. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Answer 1

The answer is: the direct labor cost per unit is $4.77

Step-by-step explanation:

First we must determine the number of completed equivalent units:

Initial inventory 25,000 at 55% complete

• 25,000 x 55% = 13,750

Completed units 110,000 at 100% complete

• 110,000 x 100% = 110,000

Ending inventory 30,000 at 30% complete

• 30,000 x 30% = 9,000

The total amount of equivalent units completed are 13,750 + 110,000 + 9,000 = 132,750 units

Then we add all the labor costs (labor costs associated to initial inventory + direct labor costs incurred during March)

$578,900 + $54,700 = $633,600

Now we divide the total labor cost incurred by the equivalent units:

$633,600 / 132,750 = $4.77 per unit