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The combined costs of direct labor and factory overhead per equivalent unit used by many businesses with process operations are called Conversion costs per equivalent unit.
Conversion costs per equivalent unit.
- The sum of the conversion costs for the initial work-in-progress inventory, the conversion costs transferred in, and the total conversion costs incurred during the period equal the cost per equivalent unit for conversion expenses.
- Units in ending inventory and units that are moved to the following department are valued using the costs per equivalent unit.
- Direct labor and production overheads make up the two primary parts of conversion expenses.
- Wages, rent, depreciation on machinery and equipment, plant insurance, plant utilities, plant expansion, supervision, plant repairs, plant security, and maintenance are a few examples of charges that may be considered conversion costs.
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