EXERCISE 3-7. Cost per Equivalent Unit [LO 3] The balance in beginning Work in P

Question

EXERCISE 3-7. Cost per Equivalent Unit [LO 3] The balance in beginning Work in Process at
Bing Rubber Company for direct labor was $140,000. During the month of March, an additional
$700,000 of direct labor was incurred, and 30,000 pounds of rubber were produced.At the end of
March, 10,000 pounds of rubber were in process and the units were 50 percent complete. At the
start of March, the company had 6,000 pounds of rubber that were 40 percent complete.
Required
Calculate the cost per equivalent unit for labor assuming that labor is added uniformly throughout
the production process.

Explanation / Answer

Initially we have to calculate the work done in the month of march.

30,000 pounds were completely finished by the end of march.And only 50% of the 10,000 pounds that is equivalent to 10,000 x .5 = 5000 pounds . 40% work on the 6,000 pounds that is equivalent to 6000 x .4 = 2400 pounds were already done at the start of march

So, Net work done in march = 30,000 + 5000 - 2400 = 32,600 pounds

A total amount for labor in the month = $140,000 + $700,000 = $840,000

Hence cost per equivalent unit for labor = 840000/32600 = 25.77$/pound

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