alleryStart learning →Direct materials cost $700, direct labor is $500 and factory overhead is $300 on a batch of cabinets. What are conversion costs?
A$1,200
B$800
C$1,000
D$1,500
Answer & Solution
Correct answer: B. $800
1. Conversion costs are direct labor plus factory overhead, the costs of turning materials into a finished item.
2. Direct labor is $500 and factory overhead is $300.
3. Conversion costs are $500 plus $300, which is $800.
4. $1,200 is prime cost and $1,500 is the total product cost, so neither answers this question.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 1.2 Cost Terminology and Concepts_
Keep practising Managerial Accounting Concepts
Browse all Managerial Accounting Concepts questions for US CMA Part 1, or explore more Management Accounting topics.
Related questions
How does activity-based costing relate to job order costing and process costing?Which costs are classified as period costs in a manufacturing business?Prime cost is the sum of which two manufacturing costs?Budgeting and variance analysis both sit under which broad category of managerial accountiA business assembles and packages products for sale to merchandisers or end users. How is Which report is published at fixed intervals as part of financial accounting?Flip and match the cost pairsFill in prime and conversion cost