A company uses the FIFO method for inventory costing. During a period, a product

Question

A company uses the FIFO method for inventory costing. During a period, a production department had 20,000 units in beginning goods in process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending goods in process inventory and are 75% complete. All of these are with respect to labor. The production department had labor costs in the beginning goods is process inventory of $99,000 and total labor costs added during the period are $726,825. Compute the equivalent cost per unit for labor.

Explanation / Answer

Equivalent units = 165,000 + 22,000*.75 – 20,000*.40 = 173,500 equivalent units $726,825/173,500 equivalent units = $4.19 per equivalent unit

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