What do equivalent units represent in process costing?

Equivalent units are a key concept in process costing that allow managers to measure production efficiency and allocate costs appropriately to partially completed items. This concept becomes particularly important in industries where products are manufactured in a continuous process, leading to work-in-progress inventory.

The correct answer emphasizes that equivalent units reflect the total volume of work done during a period, expressed in terms of completed units. Specifically, it is calculated by taking the number of physical units and multiplying that by the percentage of completion for those units at the end of the accounting period. This approach enables a clear representation of the completed work, even when not all units are fully finished. By accounting for the partial completion of items, businesses can more accurately assign costs related to production, resulting in a better understanding of overall efficiency and financial performance.

In contrast, other options do not accurately define equivalent units. The total number of completed products fails to include those that are still in progress. The actual costs incurred during production relate to expenses and do not specifically address how these are distributed across completed and incomplete units. Similarly, average costs per unit focus on the distribution of costs rather than the completion status of the products, which does not capture the essence of what equivalent units represent in process costing.