For decision-making purposes,________ costs 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

Product costs are the costs directly associated with producing a product, and they can be further classified into prime costs (direct materials and direct labor) and conversion costs (direct labor and manufacturing overhead). This is important for decision-making purposes as it allows companies to identify the specific costs that are most relevant to their production process and make informed decisions about pricing, production volume, and other key factors. Fixed costs, period costs, and sunk costs are not directly related to the production process and are not typically broken down in this way.

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