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Chapter 9

Closing work in progress (CWIP)

At the end of an accounting period there may be some units that have entered a
production process but the process has not been completed. These units are called
closing work in progress (or CWIP) units.

We need to be able to value any work in progress and completed units at the end of
a period. To do this in a fair way we use the concept of equivalent units.

Equivalent units = Number of physical units × percentage completion.

EM Ltd is a manufacturer. Information for period 1 is as follows:

Completed units = 800

Closing work in progress (CWIP) = 200 units which are 35% completed

Costs incurred in the period = $11,832

Calculate the number of equivalent units at the end of the period

EU

Completed units 800 × 100% = 800

Closing WIP 200 × 35% = 70

Total EU 870

Calculate the cost per EU

The cost per equivalent unit is calculated as total cost divided by the number of EU
produced.

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