ECONOMICS

Detailed explanation-1: -To simply calculate equivalent units, you can multiply the number of physical items by the percentage of the work done on them. For two items that are 50% done, you would have one equivalent unit (2 x 50% = 1). When the items are completely finished, the number of equivalent units is equal to the physical items.

Detailed explanation-2: -In the given situation, % of completion is 60% of 1000 units. Therefore 600 units are to be considered as equivalent units.

Detailed explanation-3: -An accountant or manager deducts the asset’s salvage value from its original cost, and this total provides the depreciable cost of the asset. Managers must then divide this depreciable cost by the life span in units or hours. The resulting number is the average unit of production.

Detailed explanation-4: -Equivalent units are notional whole units that are equivalent to the number of incomplete units adjusted for their stage of completion. For example, if there are 200 incomplete units in a process at the end of a period and they are 75% complete then this is equivalent to 150 (200 × 0.75) whole (complete) units.