Which of the following is true of conversion costs?
A) Conversion costs include direct labor and overhead.
B) Conversion costs include direct materials and direct labor.
C) Conversion costs include direct labor and selling expenses.
D) Conversion costs include direct materials and indirect labor.

Question

Quizplus · Accepted Answer

Conversion costs consist of the expenses incurred in converting raw materials into finished goods, and include direct labor and overhead costs such as utilities, rent, and maintenance. Direct materials are not included in conversion costs as they are part of the prime cost. Selling expenses are also not included as they are considered period expenses rather than product costs. Indirect labor is included in overhead costs.

Which of the Following Is True of Conversion Costs