- This topic has 1 reply, 1 voice, and was last updated 8 years, 10 months ago by .
-
Topic
-
“The term equivalent units (EU) refers to the number of whole units that could have been produced during the period in terms of cost incurred. For example, the cost associated with 6 units that are 50% complete is equivalent to the cost associated with 3 units that are 100% complete.” –CPAexcel
Note: These units are not to be confused as Finished goods, but as units moving through a production process. Assume that in the production process, there exist various layers of processing department, which either add material and/or conversion costs (i.e., labor, and OH) to WIP. As goods move from department to department through the manufacturing process, these costs accumulate.
Example: Out of 10,000 units, an equivalent unit of 7,500 has gone through the process in obtaining the raw materials necessary to be used in production (75% Complete in relation to the Material Cost assignment process). And of the 10,000 units, only an equivalent unit of 5,000 has gone through the conversion process (50% Complete in relation to the Conversion Cost assignment process).
- You must be logged in to reply to this topic.