How does accretion of units affect the costs per unit?

Accretion refers to an increase in units or volume because of the addition of material or to factors (such as heat) that are inherent in the production process.4 For example, adding soybean derivative to beef in preparing packages of hamburger causes the pounds of product to increase just as including pasta increases the volume of a casserole.

If materials are added in a single department, the number of equivalent units computed for that department compensates for this increase from the beginning to the end of processing. When accretion occurs in successor departments in a multi-department process, the number of units transferred into the department and the related cost per unit must be adjusted.

For instance, assume that one paint made by Impervious Inc. requires processing in two departments. Department 2 adds a compound to increase the scratch-resistant properties of the mixture produced in Department 1. The gallons of compound added increase the total gallons of mixture that were transferred out of Department 1 and decrease the transferred-in cost per unit.