Question

Department Z of BILMOKO, Inc. uses the average cost method, and the department’s production data for May, 1999 was as follows:

Opening work in process (50% complete) 2,000 units

Placed in process during the month 20,000 units

Closing work in process (60% complete) 2,500 units

Direct labor cost in the opening work in process was P60,000 while direct labor cost added during the month was P780,000. The direct labor cost per equivalent unit is:

P40

37.5

30

34.5

Answer 1

	Calculation of Units Completed and transferred:
A	Opening Work in Process	2,000
B	Placed in Process during the month	20,000
C	Total Units (A+B)	22,000
D	Closing Work in Process	2,500
E	Units Completed and transferred (C-D)	19,500

	Calculation of Equivalent Units of Production:
		Whole Units	% complete	Equivalent Units
A	Units Completed and transferred	19,500	100%	19500
B	Closing Work in Process	2,500	60%	1500
C	Equivalent Units of Production (A+B)			21000

	Calculation of Direct Labor Cost per Equivalent Unit:
		In P
A	Direct Labor Cost in Opening Work in Process	60,000
B	Direct Labor Cost added during the month	780,000
C	Total Direct Labor Cost (A+B)	840,000
D	Equivalent units of Production	21,000
E	Direct Labor Cost per Equivalent Unit (C/D)	40.00

Direct Labor Cost per Equivalent Unit = P40

Correct Option: P40