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?

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