A company uses a process cost accounting system. Its Assembly Department's beginning inventory consisted of 50,000 units, 3/4 complete with respect to direct labor and overhead. The department started and finished 127,500 units this period. The ending inventory consists of 40,000 units that are 1/4 complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:
A) $0.14.
B) $0.16.
C) $0.17.
D) $0.30.
E) $0.37.

Question

Quizplus · Accepted Answer

First, we need to calculate the equivalent units of production for direct labor.

Units to account for:
Beginning inventory: 50,000
Started and completed: 127,500 
Total units: 177,500

Units accounted for:
Ending inventory: (40,000)

Equivalent units of production:
Beginning inventory: 50,000 x 3/4 = 37,500 
Started and completed: 127,500 
Ending inventory: 40,000 x 1/4 = 10,000 
Total equivalent units: 175,000

Next, we calculate the cost per equivalent unit of direct labor:

Total direct labor costs = $24,000 
Total equivalent units of production for direct labor = 175,000

Cost per equivalent unit of direct labor = $24,000 ÷ 175,000 = $0.137 = $0.17 (rounded to the nearest cent)

Therefore, the correct answer is C) $0.17.

A Company Uses a Process Cost Accounting System