The term "conversion costs" refers to:
A)The sum of direct labor costs and all factory overhead costs.
B)The sum of direct material costs and direct labor costs.
C)All costs associated with manufacturing other than direct labor costs.
D)Direct labor costs incurred to produce units of output.

Question

Quizplus · Accepted Answer

Conversion costs refer to the costs incurred in converting raw materials into finished products, which includes direct labor costs and all factory overhead costs. Direct material costs are not included in conversion costs as they are part of the manufacturing stage prior to the conversion stage. Therefore, the best choice is A.

The Term "Conversion Costs" Refers To