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 =

Answer 1

• All working forms part of the answer

Reconciliation of Units
Opening WIP	5500
Introduced [46900+8800-5500]	50200
TOTAL	55700
Transferred	46900
Closing WIP	8800
Statement of Equivalent Units
		Labor Cost
	Units	Complete %			Equivalent units
Transferred	46900	100%			46900
Closing WIP	8800	40%			3520
Total	55700	Total			50420
Cost per Equivalent Units
COST	Material cost
Labor Cost	$266,300
Total Equivalent Units	50,420
Cost per Equivalent Units	5.2816 or $5.28 per unit

• Requirement 1

	Units	Percent of work performed	Equivalent Units
Units completed	46900	100%	46900
Ending goods in process	8800	40%	3520
Total	55,700		50,420

• Requirement 2: Average cost per equivalent unit = $5.28 as calculated above