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 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.
(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

Explanation / Answer

a. 46,900 were completed and transferred to finished goods, which is 46,900 equivalent units. 8,800 were in ending inventory. These were 40% complete. So this is 0.40*8800 = 3,520 equivalent units. 46,900 equivalent units plus 3,520 equivalent units = 50,420. Answer: 50,420 equivalent units. b. 266,300/50,420 = $5.28 per equivalent unit Answer: $5.28 per equivalent unit

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