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2 February, 03:47

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?

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  1. 2 February, 07:07
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    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

    First in First Out Weighted Average method

    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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