The document discusses equivalent units of production, which expresses partially completed products in terms of fully completed units. It provides an example of a company that started 15,000 units, completed 10,000 units, and had 5,000 units that were 30% complete, for a total of 11,500 equivalent units. It then calculates the cost per equivalent unit as the total costs divided by the equivalent units.

1. Equivalent Units of Production
Equivalent units are partially complete
and are part of work in process
inventory. Partially completed
products are expressed in terms of a
smaller number of fully completed
units.

2. Equivalent Units of Production
Two half completed products are
equivalent to one completed product.
So, 10,000 units 70 percent complete
are equivalent to 7,000 complete units.
So, 10,000 units 70 percent complete
are equivalent to 7,000 complete units.
+ = 1

3. For the current period, Jones started 15,000
units and completed 10,000 units, leaving
5,000 units in process 30 percent complete.
How many equivalent units of production did
Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
For the current period, Jones started 15,000
units and completed 10,000 units, leaving
5,000 units in process 30 percent complete.
How many equivalent units of production did
Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
Quick Check 

4. For the current period, Jones started 15,000
units and completed 10,000 units, leaving
5,000 units in process 30 percent complete.
How many equivalent units of production did
Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
For the current period, Jones started 15,000
units and completed 10,000 units, leaving
5,000 units in process 30 percent complete.
How many equivalent units of production did
Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
10,000 units + (5,000 units × 0.30)
= 11,500 equivalent units
Quick Check 

5. Calculating and Using
Equivalent Units of Production
To calculate the cost per
equivalent unit for the period:
Cost per
equivalent
unit
=
Costs for the period
Equivalent units of production
for the period

6. Now assume that Jones incurred
$27,600 in production costs for the
11,500 equivalent units of production.
What was Jones’ cost per equivalent
unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Now assume that Jones incurred
$27,600 in production costs for the
11,500 equivalent units of production.
What was Jones’ cost per equivalent
unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Quick Check 

7. Now assume that Jones incurred
$27,600 in production costs for the
11,500 equivalent units of production.
What was Jones’ cost per equivalent
unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Now assume that Jones incurred
$27,600 in production costs for the
11,500 equivalent units of production.
What was Jones’ cost per equivalent
unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
$27,600 ÷ 11,500 equivalent units
= $2.40 per equivalent unit
$27,600 ÷ 11,500 equivalent units
= $2.40 per equivalent unit
Quick Check 

8. Equivalent Units of Production –
Weighted Average Method
The weighted average method . . .
• Makes no distinction between work done in prior
and current period.
• Blends together units and costs from prior
period and current period.
Let’s see how this works!

9. Weighted Average Example
Smith Company reported the following activity
in Department A for the month of June:
Percent Completed
Units Materials Conversion
Work in process, June 1 300 40% 20%
Units started into production in June 6,000
Units completed and transferred out 5,400
of Department A during June
Work in process, June 30 900 60% 30%

10. Equivalent units are calculated as follows:
Weighted Average Example
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400

11. Equivalent units are calculated as follows:
Weighted Average Example
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
Equivalent units of Production in
Department A during June 5,940

12. Equivalent units are calculated as follows:
Weighted Average Example
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
Department A during June 5,940 5,670

13. Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
Department A during June 5,940 5,670
Equivalent units of production always equals:
Units completed and transferred
+ Equivalent units remaining in work in process
Equivalent units of production always equals:
Units completed and transferred
+ Equivalent units remaining in work in process
Weighted Average Example

14. Beginning
Work in Process
300 Units
40% Complete
Ending
Work in Process
900 Units
60% Complete
6,000 Units Started
5,400 Units Completed
5,100 Units Started
and Completed
Weighted Average Example
MaterialsMaterials
5,400 Units Completed
540 Equivalent Units 900 × 60%
5,940 Equivalent units
of production

15. 6,000 Units Started
5,400 Units Completed
5,100 Units Started
and Completed
270 Equivalent Units 900 × 30%
5,670 Equivalent units
of production
Beginning
Work in Process
300 Units
20% Complete
Ending
Work in Process
900 Units
30% Complete
Weighted Average Example
ConversionConversion