Process costing often groups direct labor and manufacturing overhead as conversion costs Selling and administrative costs are period costs related to the sales of products and management of the company and are not directly tied to a specific product

Process costing determines the cost per unit through the use of equivalent units, or the number of units that would have been produced if production was sequential instead of in batches The three categories of costs incurred in producing an item are direct material, direct labor, and manufacturing overhead

process costing — costing system used when a standardized process is used to manufacture identical products and the direct material, direct labor, and manufacturing overhead cannot be traced to a…. equivalent units — number of units that would have been produced if the units were produced sequentially and in their entirety in a particular time period. period costs — typically related to a particular time period instead of attached to the production of an asset; treated as an expense in the period incurred (examples include many sales and…. conversion cost — total of labor and overhead for a product; the costs that “convert” the direct material into the finished product.