 In this presentation, we will discuss the discussion question of what are equivalent units and how are they used? Support a counting instruction by clicking the link below giving you a free month membership to all of the content on our website Broken out by category further broken out by course each course then organized in a logical Reasonable fashion making it much more easy to find what you need then can be done on a YouTube page We also include added resources such as excel practice problems PDF files and more like QuickBooks backup files when applicable So once again click the link below for a free month membership to our website and all the content on it If we see a discussion question or an essay question like this We may want to start off with the definition of what equivalent units are or our best guess of it our description of the definition But we probably want to expand on that as well If it's a discussion question, we want to expand on the discussion And if it's going to be an essay question, we want to pick up as many points as we can by expanding on that Now here the first thing we can think about is if we think about Equivalent units, we're typically thinking about a manufacturing company and not only that we're thinking about one that doesn't have a job cost system But typically a process cost system So that might be where we want to start depending on where we are at if we're working in a section where we're working just on the Process cost system then that might be some kind of an obvious Statement however if you're not working in a system that's just using the process cost system It would not be and that would probably be one of the first things you want to point out Say hey, this is going to be something that typically is going to be used within a manufacturing type company Not only that it's typically going to be used in a process cost type of manufacturing system as opposed to a job cost type of Manufacturing system now the equivalent units you can refer to as the number of units that could have been started and Completed given the cost incurred during the period. That's going to be kind of a formal type of desk definition It's going to be a type of estimate. So we're going to have some type of estimate for the equivalent units They're not in other words the actual units that were started or completed And of course as we consider this in a manufacturing company as we manufacture things in a process cost systems As they're going through a process we're thinking of things like possibly Refining oil or making taffy or something like that where we're making the same thing all of the time We're going to have some units that aren't quite completed And of course one of our problems then is going to be to assign the costs to the proper area Within the process we want to assign the cost to the proper process or to the proper place within the flow of Inventory one way to do that is to use equivalent units So equivalent units is going to be one method that we have to try to assign the costs that we incurred Throughout a period to the proper location to the proper process to the proper place to record inventory We can then expand on the types of equivalent units that are typically going to be used the actual units that we think about Units that have actually been started some of them might be completed and some of them might be in process So when we think about actual units that are in process Then we're going to convert that to an equivalent unit in a couple different ways One is with relation to the materials and the other is with relation to Conversion so one is going to be with relation to the raw materials that go into the process and the other are going to be the things that Transform that raw material things like overhead things like labor And so we're going to have to estimate then with the with the actual units We're going to think about those actual units and see what the equivalent units would be with regards to the Materials typically breaking out equivalent units based on the materials and then we'll consider those same actual units that some of them are done Some of them might not be done throughout the process and think about the amount that is equivalent units with relation to the conversion How far done are they and then you might estimate well? How would we do that? How would we know how much is done and there's a couple different methods that we could use we can we can assume a first in first out Or an average type of method we can assume that the materials went in the process at the beginning possibly in like a first out type first in first out type of method and For the conversion cost We're going to have to come up with some type of estimate to note how much has been completed at some point in time as well So we need to basically we're going to have to use some type of estimate to think about the amounts that have been started In terms of how converted how finished are they with regards to the conversion items those being labor and overhead