Exercise 3: Quantity schedule and equivalent units

Learning objective:
This exercise illustrates the preparation of a quantity schedule and the computation of equivalent units under both the weighted average method and the FIFO method.

Southern Company produces a cleaning product known as Detergent-DK. The product is processed through two departments – Department X and Department Y. Materials are added at the beginning of the process in Department X. The information relating to Detergent-DK processed in Department X during the month of August is given below:

• Work in process, August 1: 15,000 liters (55% complete)
• Started into processing during August: 240,000 liters
• Work in process, August 31: 10,000 liters (90% complete)

The percentages of completion of beginning and ending work-in-process inventories given above are related to conversion cost only.

Required: Prepare a quantity schedule and compute equivalent units of production for Department X using:

1. the weighted average method
2. the FIFO method

Solution

1. Quantity schedule and equivalent units – weighted average method:

*15,000 liters + 240,000 liters – 10,000 liters
= 245,000 liters

2. Quantity schedule and equivalent units – FIFO method:

*Work required to complete liters in work in process beginning inventory:
= 100% – 55%
= 45%
= 15,000 liters × 45%
= 6,750 liters

**240,000 liters started – 10,000 liters in ending work in process
= 230,000 liters started and completed during August
or
245,000 liters completed and transferred out – 15,000 liters in beginning inventory
= 230,000 liters started and completed during August