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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Why is the cost per equivalent unit often determined separately for direct materials and conversion costs?

To determine

Process costs

It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

Equivalents units for production

The activity of a processing department in terms of fully completed units is known as equivalent units. It includes the completed units of direct materials and conversion cost of beginning work in process, units completed, and transferred out, and ending work in process.

To ascertain: The reason as to why cost per equivalent unit for direct material, and conversion costs are determined separately.

Explanation

The cost per equivalent unit is commonly determined individually for direct materials and conversion costs, since these costs are regularly added at different rates in the production process...

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