Why are equivalent units of production used in process costing?
A)To determine the total of overhead costs
B)To determine the number of units in work in process and finished goods inventories
C)To determine the costs per unit and costs of inventories in each process
D)To determine the length of the process

Question

Quizplus · Accepted Answer

Equivalent units of production are used in process costing to determine the costs per unit and the costs of inventories in each process. This is because in process costing, multiple batches of products are produced simultaneously and the units are not all completed at the same time. Therefore, equivalent units allow for a standardized measure of the work done in each process and enable the calculation of the costs of production for each unit. Option A and D are incorrect as overhead costs and process length are not directly related to equivalent units of production. Option B is partially correct, but only represents one of the purposes of using equivalent units.

Why Are Equivalent Units of Production Used in Process Costing