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
- First in First Out
- Weighted Average method
<em>Weighted average method</em>
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
<em>Note the completed units = opening inventory + newly introduced units - closing inventory </em>
Completed units= 39,000 + 124,000 - 34,000
= 129,000 units.
Equivalent units for conversion cost = 129,000 +27,200 = 156,200 units
