Using conversion cost per equivalent unit is appropriate for many businesses that use process costing because:
A) All manufacturing costs are entered into the production process in the same period.
B) Direct labor and factory overhead enter the production process at the same rate.
C) Equivalent cost per unit is not sufficient measurement of production activity.
D) The weighted average method of calculating equivalent units requires it.
E) Direct materials and direct labor are usually entered into the production process at the same rate.

Question

Quizplus · Accepted Answer

Conversion cost per equivalent unit is appropriate for process costing businesses because it combines the cost of direct labor and factory overhead, which are both considered conversion costs. Direct labor and factory overhead costs are incurred simultaneously, making it reasonable to combine them when calculating the equivalent unit cost.

Using Conversion Cost Per Equivalent Unit Is Appropriate for Many