The direct manufacturing labor costs is added into manufacturing overhead cost to calculate ___________?
Correct answer: B. conversion costs
- A. transaction costs
- B. conversion costs
- C. resale costs
- D. merchandise costs
Explanation
Conversion cost equals direct manufacturing labor plus manufacturing overhead because these are the costs of converting raw materials into finished goods. Transaction, resale and merchandise costs use different classifications.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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