Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 24

Cost per equivalent unit is $2 per EU for materials and $3 per EU for conversion. There are no trans- ferred-in costs and no spoilage. What is the cost of goods completed if 10,000 units are completed and 1,000 are in ending inventory?

Step 1 of 5

Equivalent units:

In a manufacturing concern production is a continuous process. But at the end of the accounting period every organization is required to calculate the cost incurred in production but it may cause problem due to the work in progress in the inventory.

Wok-in-progress inventory means that raw material on which process has started but has not been completed yet. Hence, for the sake of calculating cost companies convert the partially completed units into completed units which are known as the equivalent units.