5. ABC Company uses a process cost accounting system. The following information
ID: 2510022 • Letter: 5
Question
5. ABC Company uses a process cost accounting system. The following information is available regarding direct labor for the current year:
Goods in process on January 1st 5,500 units 80% complete
goods in process December 31st 8,800 units 40% complete
Units completed and transferred to finished goods 46,900 units
Direct labor costs during the year $266,300
(a) Calculate the equivalent units of production for direct labor for the year using weighted average. (1 point)
(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent). (1 point)
You must show your work for both parts of this problem for credit. You may use the template below for part (a). Hint: Average cost per EU for part (b) should be a number between $5.10 and $5.40.
Percent of Equivalent
Units Work Performed Units
Units completed
Ending goods in process
Total
(b) Average cost per equivalent unit =
Explanation / Answer
Answer
Reconciliation of Units
Opening WIP
5500
Introduced [46900+8800-5500]
50200
TOTAL
55700
Transferred
46900
Closing WIP
8800
Statement of Equivalent Units
Labor Cost
Units
Complete %
Equivalent units
Transferred
46900
100%
46900
Closing WIP
8800
40%
3520
Total
55700
Total
50420
Cost per Equivalent Units
COST
Material cost
Labor Cost
$266,300
Total Equivalent Units
50,420
Cost per Equivalent Units
5.2816 or $5.28 per unit
Units
Percent of work performed
Equivalent Units
Units completed
46900
100%
46900
Ending goods in process
8800
40%
3520
Total
55,700
50,420
Reconciliation of Units
Opening WIP
5500
Introduced [46900+8800-5500]
50200
TOTAL
55700
Transferred
46900
Closing WIP
8800
Statement of Equivalent Units
Labor Cost
Units
Complete %
Equivalent units
Transferred
46900
100%
46900
Closing WIP
8800
40%
3520
Total
55700
Total
50420
Cost per Equivalent Units
COST
Material cost
Labor Cost
$266,300
Total Equivalent Units
50,420
Cost per Equivalent Units
5.2816 or $5.28 per unit
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