'Conversion costs' include:
A)only direct materials.
B)direct materials and direct manufacturing labour costs.
C)direct manufacturing labour and manufacturing overhead costs.
D)direct materials and manufacturing overhead costs.

Question

Quizplus · Accepted Answer

Conversion costs refer to the expenses incurred in converting raw materials to finished goods, which include direct manufacturing labour costs and manufacturing overhead costs. Direct materials are not included in conversion costs because they are considered as the cost of the raw materials used in production, not the cost of converting them into finished goods. Therefore, the correct option is (C), which includes both direct manufacturing labour costs and manufacturing overhead costs.

'Conversion Costs' Include