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) $5.85.
C) $0.84.
D) $5.60.
E) $5.02.

Question

Quizplus · Accepted Answer

The total equivalent units for labor are calculated by adding the completed units (86,000) and the equivalent units for ending inventory (15,000 units * 25% = 3,750). The total labor cost is the sum of beginning inventory labor cost ($52,100) and labor cost incurred during July ($450,750), totaling $502,850. The direct labor cost per equivalent unit is $502,850 divided by 89,750 equivalent units, which equals approximately $5.60.

During July, the Production Department of a Process Operations System