Equivalent Units of Production
A term used in cost accounting to arrive at the cost per unit. The term is associated with the units that are not finished at the end of an accounting period. For example, if 500 units are completed as far as materials, but are only 40% completed as far as direct labor and developed overhead, the equivalent units are 500 for materials and 200 (40% of 500) for direct labor and manufacturing operating cost.
Learning Objective: Prepare the format of cost of production report. Calculate equivalent units of production. What is the treatment of normal and abnormal loss in process costing system? How the timing of normal and abnormal loss is considered in a cost of production report?
Equivalent Units of Production: Definition and Explanation of Equivalent Units of Production: After materials, labor and overhead costs have been accumulated in a department, the department’s output must be determined so that unit cost can be computed. A department usually has some partially completed
Equivalent Units of Production Definition: The product of the number of partially completed units and their percentage of completion with respect to a particular cost. Equivalent units are the number of complete whole units one could obtain from the materials and effort contained in