For decision-making purposes,________ are often divided into prime costs and conversion costs.
A)fixed costs
B)product costs
C)period costs
D)sunk costs

Question

Quizplus · Accepted Answer

Prime costs are the direct costs of materials and labor that go into producing a product, while conversion costs are the indirect costs such as overhead and labor that go into converting the materials into the final product. Therefore, the division of costs into prime and conversion costs is most relevant to decision-making regarding product costs. Fixed costs and period costs are not relevant to this division, and sunk costs are costs that have already been incurred and do not affect future decisions.

For Decision-Making Purposes,________ Are Often Divided into Prime Costs and Conversion