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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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Kolawole845

Answer:

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

  1. First in First Out
  2. 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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