A company uses a process cost accounting system and the weighted average method

Question

A company uses a process cost accounting system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year:

goods in process, January 1 5,500 units 80% complete
goods in process december 31 8,800 units, 40 complete
units completed and transferred 46,900 units
to finished goods
direct labor costs during the year $266,300

(a) Calculate the equivalent units of production for direct labor for the year.
(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

Explanation / Answer

a) Units completed and transferred 46,900 100 percent completed Goods In Process, Dec 31 8,800 x .40 3,520 40 percent completed TOTAL EQUIVALENT UNITS OF PRODUCTION 50,420 b) Average Cost per equivalent unit for dir lab $266,300/50,420 = $5.28

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