Calculate cost per equivalent unit, equivalent units, and assigned costs for ending WIP using quick, weighted-average, or FIFO methods.

Weighted-average cost pool for one matching cost category. All costs are in US dollars.

No loss, spoilage or transferred-in cost model. Conversion means labor plus manufacturing overhead. Production modes require a reconciled unit flow.

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Cost Per Equivalent Unit Formula

The following weighted-average equation applies to one cost category with known equivalent units. FIFO instead divides current added costs by current-period equivalent units; beginning costs carry into the completed beginning WIP layer.

CPEU = (BWIP + CAP) / EU
  • Where CPEU is the cost per equivalent unit ($/equivalent unit)
  • BWIP is the beginning work in process inventory costs ($)
  • CAP is the costs added this period ($)
  • EU is the number of equivalent units

For weighted-average cost per equivalent unit, divide beginning plus added costs by the matching equivalent units, calculated separately for materials and conversion. Weighted-average EU = completed units + ending WIP units × ending completion percentage / 100. FIFO EU = beginning WIP units × (1 − beginning completion percentage / 100) + units started and completed + ending WIP units × ending completion percentage / 100.

What is Cost Per Equivalent Unit?

Definition:

A weighted-average cost per equivalent unit pools beginning and current costs. FIFO measures only current-period work and costs. Production modes assume no losses or spoilage; FIFO requires all beginning WIP to be completed.

Equivalent units express work performed as fully complete units for each cost category. Conversion combines labor and manufacturing overhead. Material and conversion completion can differ.

How to Calculate Cost Per Equivalent Unit?

Example Problem:

The following example uses a single weighted-average cost category with 100 known equivalent units. Select the unknown explicitly in the calculator; production modes also assign completed and ending WIP costs.

First, determine the beginning work in process costs. In this example, the BWIP costs are found to be $500.00.

Next, determine the added costs for this period. This period incurred additional costs of $1,000.00.

Next, determine the number of equivalent units. The number of equivalent units in this example is 100.

Finally, calculate the cost per equivalent unit using the formula above:

CPEU = (BWIP + CAP) / EU

CPEU = ($500 + $1000) / 100

CPEU = $15/equivalent unit