ECR Direct Labour/equivilant Finished Product

cyber_jules

Hi I thought I'd managed to suss out all questions which could appear in the exam - I have just come across this question to do with direct labour costs and equivilant finished production and am stuck!!

(Q) Calculate the Direct Labour cost per litre of Solvent of the equivilant Finished Product

Following data relates

Opening WIP Progress Nil
Finished output to next process 7,000 litres
Closing Work in progress 1,200 litres
Degree of completion - Direct Materials 100%
Degree of completion - DIrect Labour 50%

Direct labour costs (Calculated in previous question) £3,800

Having looked at the answer I am confused as to how it is calculated

ANy help greatly aprpeciated :001_smile:

crispy

Hello,

Equivalent Units for Labour:

Finshed Goods 7,000 @ 100% = 7,000
Cl. WIP = 1,200 @ 50% = 600

Total = 7,600

Input Cost = £ 3,800

£ 3,800 / 7,600 = £ 0.50

Is this ok?

cyber_jules

Thats ace - it all becomes clear :001_smile: I couldnt figure out where the £600 came from!! Thankyou for your help