Haberdashery Company has a beginning Work-in-Process Inventory of 39,000 units (40% complete). During the period, 124,000 units were started and the ending Work-in-Process Inventory consisted of 34,000 units (80% complete). What are the equivalent units for conversion costs using weighted-average process costing?

156,200 equivalent units

Explanation:

Equivalent units are notional whole units which represent incomplete work and are used to apportion production costs between work in progress and finished work.

Equivalent Units = Degree of work done × units of inventory

There are two (2) methods to compute equivalent units

Weighted average method

Under this method, to account for completed units , no distinction is made between work started in previous period and those started this period. It is assumed that for all completed units, 100% of the work required was done in the current period.

We can work out the Equivalent units for Haberdashery Company as follows:

Items                                Units          Workings                 Equivalent units

Completed  units            129,000      100% × 129,000     =           129,000

Closing WIP                      34,000        80% ×   34000     =             27,200

Total equivalent units                                                                 156,200

Note the completed units = opening inventory + newly introduced units - closing inventory

Completed units= 39,000 + 124,000 - 34,000

                           = 129,000 units.

Equivalent units for conversion cost = 129,000 +27,200 = 156,200 units

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