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 $147,200. During the month of March, an additional $1,249,550 of direct labor was incurred, and 32,100 pounds of rubber were produced. At the end of March, 11,300 pounds of rubber were in process and the units were 50 percent complete. At the start of March, the company had 6,710 pounds of rubber that were 40 percent complete.

Calculate the cost per equivalent unit for labor assuming that labor is added uniformly throughout the production process.

Explanation / Answer

OK, we are going to assume that the balance of $143,000 was related to rubber production. We further assume that the 6,050 lbs of rubber at the start of March is included in the 38,400 lbs. This partially complete 6,050 lbs was made with the $143,000 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 13,200lb or 6,600 lb. cost per equivalent = (143,000 + 1,072,000)$/(38,400+6,600)lb = 27$/lb

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