Corrigan, Inc. overstated the percentage of work completed with respect to conversion cost on the ending work-in-process inventory. What is the effect of this overstatement on conversion-cost equivalent units and physical units manufactured, respectively?

Answer and Explanation:

The effect of this overstatement on Conversion cost equivalent units would be overstated and in physical units manufactured it would have no effect.

Conversion cost is the sum of Direct labor and Manufacturing overheads. Therefore, an overstatement in it would mean an overall overstatement in the Conversion cost equivalent units. However, this overstatement would have no affect on the physical units as it has not affected the physical units in any way.