Question

Which of the following terms refers to the cost of changing direct materials into a finished manufactured product? a.factory overhead cost b.conversion cost c.direct labor cost d.period cost

Answer 1

Answer:

The correct answer is option b.

Explanation:

The conversion cost can be defined as the cost incurred in converting direct materials into finished products. It includes direct labor costs and manufacturing overhead costs.

In other words, it is the production cost reducing the cost of direct materials.

It is the cost involved in transforming raw materials into finished products, however, it does not include the cost of raw materials.