During January, the production department of a process operations system completed and transferred to finished goods a total of 77,000 units. At the end of January, 15,000 additional units were in process in the production department and were 40% complete with respect to labor. The beginning inventory included labor cost of $39,700 and the production department incurred direct labor cost of $315,100 during January. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

The direct labor cost per equivalent unit is $4.7

Explanation:

According to Weighted Average Method

Equivalent Units  = Unit transferred to Finished goods + Units in Work in Process x Completion percentage

Equivalent Units  = 77,000 + 15,000 x 40% = 76,000 units

Total direct labor Cost = Beginning Inventory cost + Cost incurred in the period = $39,700 + $315,100 = 354,800

Direct Labor cost per equivalent unit = Total direct labor Cost / Equivalent unit = 354,800 / 76,000 = $4.7

$4.27

Explanation:

From the question, we can have the following:

Finished goods completed and transferred = 77,000 units

Labor Work in Process completed at the end of January = 40% × 15,000 = 6,000 units

Equivalent units = 77,000 + 6,000 = 83,000 units

Total direct labor costs = $39,700 + $315,100 = 354,800

Cost per equivalent unit = $354,800/83,000 = $4.27

Therefore, the direct labor cost per equivalent unit for the department using the weighted-average method is $4.27

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