The Concept of equivalent units is used in process costing. Process costing is used when the manufacturing of product consists of several repetitive processes and the products are homogeneous. The output of preceding process will be the input of succeeding process. The inputs like raw material, labor will be added into the processes at different time intervals as per the requirement
Equivalent unit is the expression of partly completed unit (work in progress) in to a notional quantity of completed units. For example; we have 1000 partly completely units and it is assumed that they are 60% complete with regard to material and conversion costs (labor and overheads), equivalent units will be 600 units (1000 X 60%)
Equivalent units are measured to find out the cost per unit of output, value of finished production, value of work-in-progress at the end of a period