The two categories of cost comprising conversion costs are
A) direct labor and indirect labor
B) direct labor and factory overhead
C) factory overhead and direct materials
D) direct labor and direct materials

Question

Quizplus · Accepted Answer

Conversion costs refer to the costs incurred in converting raw materials into finished products. It includes two categories of costs: direct labor (wages and salaries paid to employees directly involved in the production process) and factory overhead (indirect manufacturing costs such as utilities, rent, and maintenance). Direct materials are not part of conversion costs as they are used up in the production process and become part of the cost of goods sold. Therefore, options A, C, and D are incorrect.

The Two Categories of Cost Comprising Conversion Costs Are