Why are equivalent units of production used in process costing?
A) To allocate overhead costs
B) To determine the value of work in process and finished goods inventories
C) To aid in determining costs per unit and costs of inventories in each process
D) To determine the cost per finished unit

Question

Quizplus · Accepted Answer

Equivalent units of production are used in process costing to aid in determining costs per unit and costs of inventories in each process. This is because in process costing, products are produced in batches with identical or similar characteristics, and it is difficult to assign costs directly to each unit produced. Equivalent units help in determining the cost per unit, by converting the different stages of production into a common and comparable unit of measure.

Why Are Equivalent Units of Production Used in Process Costing