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Equivalent units are mainly used in process accounting systems, but the method could also be used in a job order system. Equivalent unit calculations are used at the end of a month, to prepare monthly production reports They are also used at the end of the year to determine ending inventory values.

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 The Equivalent Unit concept has to do with costs incurred, in the form of materials, labor and overhead. Let's say it costs the company $50 to produce 1 bicycle.

Let's say at the end of a day, two bikes are half completed, and have accumulated $25 in costs each. That is the same as one equivalent unit which has accumulated $50 in costs. Using equivalents unit is a way to mathematically convert partially completed units of product into an equivalent number of fully completed units.
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 Let's look at an example: 1000 units of Product X are 50% complete at the end of the month. We convert them into equivalent units as follows: 1000 units X 50% complete = 500 equivalent units. If they were 25% complete this would be the calculation: 1000 units X 25% complete = 250 equivalent units. So equivalent unit calculation is just a way to convert partly complete products into their equivalent number of fully completed products. This doesn't make sense in every situation. Let's take a cookie bakery. They mix a batch of dough, bake the cookies, and package them all on the same day. There is no carry over of partially completed cookies from one day to the next. This company would not need to calculate equivalent units of production.
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