Stay Company uses the weighted-average method in its process costing system. The company's ending work in process stock consists of 8,000 units, 60% complete with respect to materials and 80% complete with respect to labour and overhead. If the total cost in this stock is £200,000 and if the cost for materials is £16 per equivalent unit for the period, the cost of labour and overhead per equivalent unit of the production for the period must be

Question

Quizplus · Accepted Answer

The total cost of the ending work in process stock is £200,000.
To find the equivalent units, we need to multiply the number of units (8,000) by the percentage of completion for each category (materials, labour, and overhead).
For materials:
8,000 units x 60% = 4,800 equivalent units
Cost of materials per equivalent unit = £16
Total cost of materials in ending work in process stock = £16 x 4,800 equivalent units = £76,800
For labour and overhead:
8,000 units x 80% = 6,400 equivalent units
Total cost of the ending work in process stock - total cost of materials = total cost of labour and overhead
£200,000 - £76,800 = £123,200
Cost of labour and overhead per equivalent unit = £123,200 ÷ 6,400 equivalent units = £19.25
Therefore, the answer is A) £19.25.

Stay Company Uses the Weighted-Average Method in Its Process Costing