The balance in beginning Work in Process at Bing Rubber Company for direct labor

Question

The balance in beginning Work in Process at Bing Rubber Company for direct labor was $148,800. During the month of March, an additional $865,920 of direct labor was incurred, and 40,000 pounds of rubber were produced. At the end of March, 10,600 pounds of rubber were in process and the units were 50 percent complete. At the start of March, the company had 5,520 pounds of rubber that were 50 percent complete. Calculate the cost per equivalent unit for labor, assuming that labor is added uniformly throughout the production process.

cost per equivalent unit $___________________per pound

Explanation / Answer

we are going to assume that the balance of $148,800 was related to rubber production. We further assume that the 5,520 lbs of rubber at the start of March is included in the 40,000 lbs. This partially complete 5,520 lbs was made with the $148,800 labor. We further assume cost in $ and equivalents in lbs.
So cost per equivalent is lbs produced divided by labor costs incurred. The 50% complete rubber counts as half of 10,600lb or 5,300 lb

cost per equivalent = (148,800 + 865,920)$/(40,000+5,300)lb = 22.4 $

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