Equivalent units should be computed separately for direct materials and conversion costs.

Question

Quizplus · Accepted Answer

Equivalent units are calculated separately for direct materials and conversion costs because they represent different stages in the production process. Direct materials are added at the beginning of the production process and conversion costs are added later during the conversion stage. Therefore, different measuring techniques are used for each type of cost.

Equivalent Units Should Be Computed Separately for Direct Materials and Conversion