During July,the production department of a process operations system completed and transferred to finished goods 10,000 units that were in process at the beginning of July and 76,000 that were started and completed in July.July's beginning inventory units were 100% complete with respect to materials and 30% complete with respect to labor.At the end of July,15,000 additional units were in process in the production department and were 100% complete with respect to materials and 25% complete with respect to labor.The beginning inventory included labor cost of $52,100 and the production department incurred direct labor cost of $450,750 during July.Compute the direct labor cost per equivalent unit for the department using the weighted-average method.
A)$1.72.
B)$5.60.
C)$0.84.
D)$5.02.
E)$5.85.

Question

Quizplus · Accepted Answer

Step 1: Calculate the equivalent units of direct labor for July:

Equivalent units of direct labor for July = Direct labor for units completed in July + Direct labor for units in ending WIP inventory - Direct labor for beginning WIP inventory
Direct labor for units completed in July = 76,000 units × 100% labor completion = 76,000 equivalent units
Direct labor for units in ending WIP inventory = 15,000 units × 25% labor completion = 3,750 equivalent units
Direct labor for beginning WIP inventory = 10,000 units × 30% labor completion = 3,000 equivalent units

Equivalent units of direct labor for July = 76,000 + 3,750 - 3,000 = 76,750 equivalent units

Step 2: Calculate the total direct labor cost for July:

Total direct labor cost for July = Direct labor cost for units completed in July + Direct labor cost for units in ending WIP inventory
Direct labor cost for units completed in July = 76,000 units × $6 per unit = $456,000
Direct labor cost for units in ending WIP inventory = 15,000 units × 25% labor completion × $6 per unit = $22,500

Total direct labor cost for July = $456,000 + $22,500 = $478,500

Step 3: Calculate the direct labor cost per equivalent unit using the weighted-average method:

Direct labor cost per equivalent unit = Total direct labor cost for July / Equivalent units of direct labor for July
Direct labor cost per equivalent unit = $478,500 / 76,750 equivalent units = $6.23
Therefore, the direct labor cost per equivalent unit for the department using the weighted-average method is $6.23, which is closest to option B ($5.60).

During July,the Production Department of a Process Operations System Completed