Final answer:
In a process-costing system, the calculation of equivalent units is used for finding the dollar amount of the cost of goods sold for the accounting period.
Step-by-step explanation:
Calculation of Equivalent Units in Process-Costing
In a process-costing system, the calculation of equivalent units is utilized for calculating the dollar amount of the cost of goods sold for the accounting period. This concept is central to process-costing where a company produces many units of a single product for a period and needs to assign costs uniformly across identical units.
The calculation does not pertain to the dollar amount of revenue, the price earned for a particular job, or the total dollar amount of sales. Instead, equivalent units help in determining the expenses associated with producing goods that are partially completed at the end of an accounting period. Revenue is indeed a factor of price and quantity, and total cost involves all costs required to produce and sell products.
Understanding these concepts is crucial for a firm as they navigate through short run and long run costs, with variations like average cost (AC) defined as total cost (TC) divided by the quantity (Q) of output produced, and marginal cost (MC), which is the change in total cost divided by the change in quantity.