The Fedex Company produces a car care product known as Shine-9 which is a high quality vehicle cleaning liquid. The processing of Shine-9 is completed through three separate departments. The following data pertains to the company’s first processing department:
The information about the cost in work in process beginning inventory and the total cost added during the month of May is given below:
Work in process inventory on May 1:
- Materials: $28,300
- Conversion cost: $7,450
Cost added during May:
- Materials: $192,500
- Conversion cost: $107,250
- Determine the missing figures in the above schedule
(Hint: Compute equivalent units of production for May for the first department).
- Compute cost per equivalent unit for May for the first department of Fedex Company.
1. Missing figures (i.e., equivalent units of production):
Units transferred to next department are considered 100% complete with respect to materials and conversion cost. The equivalent units in ending work in process inventory have been determined as follows:
Equivalents units in work in process ending inventory:
Materials: 20,000 units × 50% = 10,000 units
Conversion: 20,000 units × 25% = 5,000 units