A company uses a process cost accounting system. Its Assembly Department\'s begi

Question

A company uses a process cost accounting system. Its Assembly Department's beginning inventory consisted of 57,200 units, 3/4 complete with respect to direct labor and overhead. The department completed and transferred out 109,500 units this period. The ending inventory consists of 47,200 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 $42,000 and overhead costs of $50,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:

Explanation / Answer

EQUIVALENT NUMBER OF UNITS WITH RESPECT TO DIRECT LOBOR = 1/4 * 57200 + 100%*109500 + 1/4 * 47200

= 14300+109500+11800

=135600 EQUIVALENT UNITS

THEREFORE the direct labor cost per equivalent unit = direct labor costs / direct labor equivalent units

= 42000/135600

=0.31 p.u.

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