ECONOMICS

Detailed explanation-1: -Charley Company’s Assembly Department has materials cost at $2 per unit and conversion cost at $4 per unit. There are 20, 000 units in ending work in process, all of which are 70% complete as to conversion costs and 100% complete as to materials.

Detailed explanation-2: -This is done because direct materials costs are often added entirely (or mostly) at the beginning of the manufacturing process, whereas conversion costs are incurred more evenly throughout the process.

Detailed explanation-3: -Equivalent units describe how much work has been done on a certain number of physical items. To simply calculate equivalent units, you can multiply the number of physical items by the percentage of the work done on them. For two items that are 50% done, you would have one equivalent unit (2 x 50% = 1).

Detailed explanation-4: -Conversion costs include the manufacturing costs that are needed to convert direct materials into final products: direct labor costs and manufacturing overhead costs.