When we look at a common method, process-based costing, People are often confused by Equivalent Units. Think of a tricycle. We may have all the parts for 10 bikes, and we may assemble two. For the other eight we have everything but the handles done. In this case, we might say they are 75% complete. While it may look like we have 10 units, and in physical count we do, we would do the math and have 2 + 8*.75 or 2 + 6, for 8 EQUIVALENT units. We would use this to figure the cost per unit.

What would the equivalent units be if we had 1,000 units 60% complete?