Question

Craigmont company's direct materials costs are $3,000,000, its direct labor costs total $7,000,000, and its factory overhead costs total $5,000,000. its conversion costs total:

Answer 1

Conversion cost is defined as the sum of direct labor costs and manufacturing overhead costs. It is the manufacturing cost needed to convert raw materials to a product. From the information given above, the conversion cost is the summation of direct material costs, direct labor costs and factory overhead costs. 
$3000,000 + 7,000,000 + 5,000,000 = 15,000,000
Therefore, the conversion cost is $15,000,000.