During January, the production department of a process operations system completed and transferred to finished goods a total of 78,000 units. At the end of January, 9,000 additional units were in process in the production department and were 65% complete with respect to labor. The beginning inventory included labor cost of $37,100 and the production department incurred direct labor cost of $294,300 during January. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.
A) $3.95.
B) $6.34.
C) $3.51.
D) $4.25.
E) $3.77.

Question

Quizplus · Accepted Answer

The weighted-average method assigns the total cost of production to the units completed and transferred out during the period and to the units in ending work in process. The cost per equivalent unit is computed by dividing the total cost incurred during the period by the total equivalent units produced during the period. In this case, the total cost incurred during the period is $294,300 + $37,100 = $331,400. The total equivalent units produced during the period is 78,000 + (9,000 x 65%) = 84,900. Therefore, the direct labor cost per equivalent unit is $331,400 / 84,900 = $3.95.

During January, the Production Department of a Process Operations System