alleryCost of conversion includes:
ASelling commission paid
BIncome tax on profits
CDirect labour and allocations
DProperty tax of factory land
Answer & Solution
Correct answer: C. Direct labour and allocations
1. Cost of conversion includes direct labour and a systematic allocation of fixed and variable production overheads.
2. Selling commissions are post-production and excluded.
3. Income tax is a profit appropriation, not an inventory cost.
_Source: ICAI BoS Foundation Paper 1, Ch 4 "Inventories", §3 cost of conversion_
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