ECONOMICS

Detailed explanation-1: -The physical units in a department are another name for the equivalent units of production. Direct material cost per equivalent unit is computed by taking total material costs charged to the department for the period and dividing by the physical units in the process during the period.

Detailed explanation-2: -Equivalent units. are calculated by multiplying the number of physical (or actual) units on hand by the percentage of completion of the units. If the physical units are 100 percent complete, equivalent units will be the same as the physical units.

Detailed explanation-3: -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.

Detailed explanation-4: -Equivalent units of production are equal to: The number of units that could have been completed if all effort had been applied to units that were started and completed that period.

Detailed explanation-5: -Equivalent units of production are always the same as the total number of physical units finished during the period. A company that uses a process cost accounting system maintains separate Work-in-Process Inventory account for EACH of its manufacturing departments.