Skip to content

Management Accounting · Cost accounting methods

Equivalent Units and Work-in-Progress in Process Costing

Updated 11 October 2026 · Fact-checked

Equivalent units convert part-finished units into the number of fully finished units the same effort would produce. Multiply units by percentage completion for each cost element, then divide costs by equivalent units to get a cost per unit. Weighted average includes opening WIP work; FIFO counts only work done this period.

Understand Equivalent Units and Work-in-Progress

In a process, units are rarely all finished at the period end. Some are still part-way through. If you divided total cost by total units, you would treat a unit that is 10% complete the same as one that is 100% complete. That gives the wrong cost per unit and the wrong value for closing work-in-progress (WIP).

The fix is equivalent units. An equivalent unit is a whole unit of work. If 1,000 units are 60% complete, they equal 600 equivalent units. You calculate this separately for each cost element, because elements are added at different stages. Materials are often added at the start, so WIP can be 100% complete for materials but only 50% complete for conversion costs (labour and overhead).

Once you have equivalent units, you work out a cost per equivalent unit for each element: cost ÷ equivalent units. You then use these to value finished output and closing WIP. Total cost in must always equal total cost out.

The two methods differ only in how they treat opening WIP. Weighted average blends opening WIP units and costs with the current period, so it treats all work as one pool. FIFO assumes opening WIP is finished first. It keeps opening WIP cost separate and uses only current period costs and current period work to get the cost per unit.

In the exam you may be told which method to use. Read the question first, because the method changes the equivalent units and the cost per unit.

Key formulas to remember

Equivalent units
Equivalent units = number of units × percentage complete (for each cost element)
Do this separately for materials, labour and overhead, or for materials and conversion if the question groups them.
Cost per equivalent unit
Cost per equivalent unit = cost ÷ equivalent units
Calculate it for each cost element separately, then add them for a total cost per complete unit.
Units reconciliation
Opening WIP + units started = units completed + closing WIP (+ normal loss/abnormal loss, if any)
Check this first. It tells you the units completed if the question does not give them.
Weighted average equivalent units
Units completed (all, including those from opening WIP) + closing WIP × % complete
Cost to divide = opening WIP cost + current period cost.
FIFO equivalent units
Opening WIP × % still to complete + units started and completed + closing WIP × % complete
Cost to divide = current period cost only. Opening WIP cost is added to the finished units separately.
Cost reconciliation
Opening WIP cost + current period costs = cost of completed units + cost of closing WIP
Use this as your final check on any answer.

How to solve Equivalent Units and Work-in-Progress questions

Use the same layout every time. It works for both methods and for any mix of materials and conversion costs.

  1. 1Read the question and note the method (FIFO or weighted average), the completion percentage of opening and closing WIP for each cost element, and whether materials are added at the start, evenly or at the end.
  2. 2Draw the units reconciliation: opening WIP + started = completed + closing WIP. Work out the missing figure, usually units completed.
  3. 3Build an equivalent units table with a column for each cost element. For weighted average: completed units plus closing WIP × % complete. For FIFO: opening WIP × % still to do, plus units started and finished, plus closing WIP × % complete.
  4. 4Decide the costs to divide. Weighted average: opening WIP cost + current period cost for each element. FIFO: current period cost only.
  5. 5Calculate the cost per equivalent unit for each element by dividing cost by equivalent units. Add them for the total cost per unit.
  6. 6Value the outputs. Closing WIP = closing equivalent units × cost per equivalent unit for each element. Completed units = weighted average: all units × total cost per unit. FIFO: opening WIP cost + cost to complete it + started-and-finished units × total cost per unit.
  7. 7Check that the value of completed units plus closing WIP equals total costs to account for, and give the answer in the form asked (number entry, or the correct option).

Quickest way: Table-first method for objective test questions

When to use it: Use this for two-mark Section A objective test questions on process costing, especially when time is short.

  1. Write the units line first and find the missing figure. This avoids the most common slip.
  2. Make one small table with rows for completed, started-and-finished (FIFO), opening WIP work and closing WIP, and a column for materials and one for conversion.
  3. Only work out the cost per unit for the element the question asks about. If you only need closing WIP materials value, you do not need the conversion calculation.
  4. For the weighted average method, remember the shortcut: the equivalent units are the same as the finished units plus the WIP equivalents. Add opening WIP cost to the period cost.
  5. For FIFO, subtract the work already done in opening WIP. Opening WIP at 60% complete means only 40% of the units remain to be done this period.
  6. Do a quick total check with the cost reconciliation. If it does not agree, find the error before you answer.

Common mistakes in Equivalent Units and Work-in-Progress

  • Using the same percentage for materials and conversion

    Students see one WIP completion figure and apply it to everything.

    Fix: Always read what the percentage refers to. Materials added at the start means 100% for materials, whatever the conversion percentage is.

  • Including opening WIP cost in the FIFO cost per unit

    Students mix the two methods and divide a pooled cost by the FIFO equivalent units.

    Fix: With FIFO, divide only current period costs by FIFO equivalent units. Add the opening WIP cost to the finished units afterwards.

  • Counting all opening WIP units as full equivalent units in FIFO

    The units were completed in this period, so they look like complete units.

    Fix: Count only the work still to be done this period: opening units × (100% - % already complete) for each element.

  • Forgetting to deduct opening WIP from units completed to get started-and-finished units

    Completed units include units that began last period.

    Fix: Started-and-finished = units completed - opening WIP units. Check that your three FIFO lines add up to the right total.

  • Valuing closing WIP using whole units

    Students multiply closing units by the full cost per unit.

    Fix: Multiply closing units by completion % for each element, then by that element's cost per equivalent unit.

  • Not checking that the cost reconciliation balances

    Time pressure leads to skipping the final check.

    Fix: Add completed output and closing WIP and compare with total costs to account for. A difference means an error, usually in equivalent units.

Worked examples

Example 1

Weighted average method. A process has opening WIP of 1,000 units (100% complete for materials, 40% for conversion) with costs of $3,000 materials and $1,800 conversion. During the period 5,000 units were started and 4,800 units were completed. Closing WIP is 1,200 units (100% materials, 50% conversion). Costs added in the period were $18,000 materials and $25,200 conversion. Calculate the cost of completed units and of closing WIP using the weighted average method.

Show the solution
  1. Units check: 1,000 + 5,000 = 6,000. Completed 4,800 + closing WIP 1,200 = 6,000.
  2. Equivalent units, materials: 4,800 + (1,200 × 100%) = 6,000.
  3. Equivalent units, conversion: 4,800 + (1,200 × 50%) = 5,400.
  4. Materials cost to divide: $3,000 + $18,000 = $21,000. Cost per equivalent unit = $21,000 ÷ 6,000 = $3.50.
  5. Conversion cost to divide: $1,800 + $25,200 = $27,000. Cost per equivalent unit = $27,000 ÷ 5,400 = $5.00.
  6. Total cost per complete unit = $3.50 + $5.00 = $8.50.
  7. Completed units: 4,800 × $8.50 = $40,800.
  8. Closing WIP: materials 1,200 × $3.50 = $4,200; conversion 600 × $5.00 = $3,000; total $7,200.
  9. Check: $40,800 + $7,200 = $48,000. Total costs = $3,000 + $1,800 + $18,000 + $25,200 = $48,000.

Answer: Completed units: $40,800. Closing WIP: $7,200.

Example 2

FIFO method. Use the same data as the previous example: opening WIP 1,000 units (100% materials, 40% conversion) costing $4,800 in total; 4,800 units completed; closing WIP 1,200 units (100% materials, 50% conversion); costs added in the period $18,000 materials and $25,200 conversion. Calculate the cost of completed units and of closing WIP using FIFO.

Show the solution
  1. Started and finished units = 4,800 - 1,000 = 3,800.
  2. Equivalent units, materials: opening WIP 1,000 × 0% = 0; started and finished 3,800; closing WIP 1,200 × 100% = 1,200. Total = 5,000.
  3. Equivalent units, conversion: opening WIP 1,000 × 60% = 600; started and finished 3,800; closing WIP 1,200 × 50% = 600. Total = 5,000.
  4. Cost per equivalent unit, materials = $18,000 ÷ 5,000 = $3.60. Conversion = $25,200 ÷ 5,000 = $5.04. Total = $8.64.
  5. Completed units: opening WIP cost $4,800, plus cost to complete 600 × $5.04 = $3,024, plus 3,800 × $8.64 = $32,832. Total = $40,656.
  6. Closing WIP: materials 1,200 × $3.60 = $4,320; conversion 600 × $5.04 = $3,024; total $7,344.
  7. Check: $40,656 + $7,344 = $48,000, which equals total costs to account for.

Answer: Completed units: $40,656. Closing WIP: $7,344.

Exam tips

  • Check the method named in the question before you start. The same data gives different answers under FIFO and weighted average, and the exam often offers the wrong-method answer as a distractor.
  • In number entry questions, round only at the end and use the rounding given in the question. Early rounding of cost per unit can change the final answer.
  • If materials are added at the start, closing WIP is 100% complete for materials. If they are added at the end, WIP has no materials. Read the wording carefully.
  • For multiple response questions, test each statement against the method. Typical true statements: weighted average blends opening WIP costs with current costs; FIFO keeps them separate.
  • In Section A, do the units reconciliation and equivalent units table on your scratch paper. Use the cost reconciliation as a check before you submit, as it can catch errors.

Practice questions from Cost accounting methods

Equivalent Units and Work-in-Progress in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Equivalent Units and Work-in-Progress: frequently asked questions

What is an equivalent unit in process costing?

It is the number of fully completed units that the work done on part-finished units is worth. For example, 800 units that are 50% complete equal 400 equivalent units. You calculate it for each cost element.

What is the difference between FIFO and weighted average in process costing?

Weighted average adds opening WIP cost to current costs and divides by all equivalent units. FIFO assumes opening WIP is completed first, uses only current period costs and only the work done this period, and adds opening WIP cost to finished units separately.

Why do I calculate equivalent units separately for materials and conversion?

Because cost elements are added at different points. Materials may all be added at the start, so WIP is 100% complete for materials. Conversion costs build up gradually, so WIP might be only 50% complete for them.

Does the cost reconciliation always balance?

Yes, if your calculations are correct. Opening WIP cost plus costs added in the period must equal the cost of completed units plus closing WIP. If there are losses, include their cost in the reconciliation as well.