ECR Direct Labour/equivilant Finished Product

cyber_jules
cyber_jules Registered Posts: 5 Regular contributor ⭐ ? ⭐
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:

Comments

  • crispy
    crispy Registered Posts: 465 Dedicated contributor ? ? ?
    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
    cyber_jules Registered Posts: 5 Regular contributor ⭐ ? ⭐
    Thats ace - it all becomes clear :001_smile: I couldnt figure out where the £600 came from!! Thankyou for your help
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