1) Conversion costs are generally added evenly throughout a process.
2) Equivalent units are the sum of direct materials and direct labor.
3) Equivalent units should be computed separately for direct materials and conversion costs.
4) The number of partially completed units multiplied by the percentage of process started equals the number of equivalent units.
5) Equivalent units express the amount of work done during a period of time in terms of fully completed units of output.
6) If a company has 5,000 units that are 60% complete, the equivalent unit figure is 3,000.
7) Conversion costs and direct materials costs are generally both added at the end of the production process.
8) In a process costing environment, direct materials and direct labor are usually combined into one cost category called “conversion costs”
9) In a process costing environment, direct labor and manufacturing overhead are usually combined into one cost category called “conversion cost”.
10) In a mass-production environment, direct labor is usually a relatively small component of the total manufacturing costs.