Learning Activity 4.5: Equivalent Units Exercise
Introduction and Purpose of Assignment
Manufacturers must account for inventory at the end of each month. As units go through the production process, they will be at various points of completion at the end of each month. To determine the inventory value, partially completed inventory is converted to equivalent completed units. This exercise walks through the equivalent units calculation.
Objectives
· Apply the concept of equivalent units to inventory valuation. (4.4)
Theory and Context
In order to create a financial statement a manufacturer must be able to identify the value of their inventory. When a company is a mass producer this is difficult to do. Think of Hershey’s kiss candy. It would be impossible to individually count and determine the value of the work-in-process inventory at the end of the period. It is also not practical to stop production in order to have only finished pieces available to count. The equivalent unit calculation helps turn all those partially completed pieces into equivalent finished pieces in order to a
ive at an inventory value.
Resources
Equivalent Units.xlsx located in the Course Documents in e360.
Ahmed, S XXXXXXXXXXEquivalent units of production. Retrieved from http:
www.accounting4management.com/equivalent_units_of_production.htm
Walther, L XXXXXXXXXXPrinciples of accounting (Managerial/cost tab). Retrieved from
http:
www.principlesofaccounting.com/managerial-cost-accounting
Chapter 20 and accompanying video in the chapter at: https:
www.youtube.com/watch?v=IMhBXeb0IsY
Instructions
1. Complete the Equivalent Units spreadsheet located in the Course Documents in e360. Refer to the resources provided above to help with this assignment.