The sum of direct labour and factory overhead costs is equal to
A) conversion costs.
B) prime costs.
C) period costs.
D) indirect costs.

Question

Quizplus · Accepted Answer

Direct labour and factory overhead costs are both part of the manufacturing process and are necessary to convert raw materials into finished goods. Therefore, their sum is considered conversion costs. Prime costs, on the other hand, is the sum of direct materials and direct labour only, and period costs are non-manufacturing costs such as selling and administrative expenses. Indirect costs are costs that cannot be directly traced to a specific product or service.

The Sum of Direct Labour and Factory Overhead Costs Is