Asked by Rawynsk Silva on May 08, 2024
Verified
Conversion cost is the combination of direct labor cost and factory overhead cost.
Conversion Cost
The total expense incurred to convert raw materials into finished goods, including labor and overhead costs.
Direct Labor Cost
Expenses related to employees who directly manufacture products or provide services, forming part of the cost of goods sold.
Factory Overhead Cost
Expenses related to the operation of a manufacturing facility that cannot be directly tied to a specific product, such as insurance and property taxes.
- Distinguish between different types of costs (direct materials, direct labor, and factory overhead).
Verified Answer
AJ
Avalon JenkinsMay 10, 2024
Final Answer :
True
Explanation :
Conversion cost includes both direct labor cost (the cost of wages and benefits for employees who physically work on the product) and factory overhead cost (the cost of indirect materials, indirect labor, and other manufacturing costs).
Learning Objectives
- Distinguish between different types of costs (direct materials, direct labor, and factory overhead).