ECONOMICS

Detailed explanation-1: -Equivalent units of production must be calculated before the unit production costs can be computed. In a process cost system, a Work in Process account is maintained for each process.

Detailed explanation-2: -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-3: -Which are true statements about equivalent units of production? It is calculated by adding units completed and transferred to the finishing department and product of the units in process and the percent complete.

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.

Detailed explanation-5: -An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially completed at the end of an accounting period. Basically the fully completed units and the partially completed units are expressed in terms of fully completed units.