Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?
A) In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.
B) All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.
C) In most cases, there is no difference between physical units and equivalent units of production.
D) Companies often use a combination of a process costing and job order costing systems.
E) In most manufacturing environments, it is not possible to conduct a physical count of units.

Question

Quizplus · Accepted Answer

Equivalent units of production are necessary in process costing because units may be partially completed at the end of a period, and assigning costs based on physical units may result in inaccurate cost accounting. Equivalent units take into account the degree of completion of each unit, allowing for more accurate costs of goods produced.

Which of the Following Is the Best Explanation for Why