Concept explainers
Equivalent Units of Production:
As per equivalent units of production, the units which are yet to complete are treated at par with fully completed units in order to allocate production cost uniformly. Both fully completed units and partially completed units are represented by fully completed units.
To identify: The correct option.
Explanation of Solution
‘Option d: The number of units that could have been started and completed given the cost incurred’ is the correct option.
Option d
Equivalent cost of production assigns the production cost uniformly to both completed units as well as partially completed units. Hence partially completed units are treated at par with completed units.
Option a
Since equivalent units of production consider both completed and partially completed units. So, this is not a correct option.
Option b
The number of units introduced into the process this period.
Since equivalent units of production consider both completed and partially completed units, this is not a correct option.
Option c
Since equivalent units of production consider both finished and partially finished units not only finished units, this is not a correct option.
Option e
Since equivalent units of production consider both completed and partially completed units not only units in process. So, this is not a correct option.
Hence the correct option is ‘d’.
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