5. ABC Company uses a process cost accounting system. The following information

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 =

tyees 5. ABC Company uses aprocess cost acsating s. The fllowing infarsatias is aralable regarding direct laber foe the cersnt year complete Goods in pro, Docembr 3 Utras completed and wwwfered to fiaished goods 365,300 Preeet o

Explanation / Answer

Solution:

Part 1 --- Equivalent Units of Production for direct labor

Physical Units

% of work performed

Equivalent Units

Completed Units during the period

46900

100%

46900

Ending Work In Process

8800

40%

3520

Total

55700

50420

Part 2 – Average Cost per Equivalent Units

Avearge cost per equivalent unit = Total Direct Labor cost / Total Equivalent Units

= $266,300 / 50,420 Units

= $5.28 per equivalent unit

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Physical Units

% of work performed

Equivalent Units

Completed Units during the period

46900

100%

46900

Ending Work In Process

8800

40%

3520

Total

55700

50420

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