# Exercise 5: Equivalent units, cost per equivalent unit – weighted average method

Learning objective:
This exercise illustrates the computation of equivalent units of production and cost per equivalent unit under the weighted average method.

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:

Information about the cost of 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: \$192,500
• Conversion cost: \$107,250

Required:

1. Determine the missing figures in the above schedule. (Hint: Compute the equivalent units of production for May for the first department).
2. Compute the cost per equivalent unit for May for the first department of Fedex Company.

## Solution

### 1. Missing figures (i.e., equivalent units of production):

Units transferred to the next department are considered 100% complete with respect to materials and conversion costs. The equivalent units for 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

### 2. Cost per equivalent unit:

Help us grow by sharing our content