The following costs were incurred in August:
No, Conversion cost is the sum of direct labor cost and manufacturing overhead cost.
false, direct labor and manufacturing overhead = conversion cost
conversion cost = direct wages + factory overheads (indirect material + indirect wages)
The one cost that would be classified as part of both prime cost and conversion cost would be:
The one cost that would be classified as part of both prime cost and conversion cost
The two categories of cost comprising conversion costs are direct labor and factory overhead
Prime cost basically is the cost of direct labor and cost of direct material; whereas conversion costs is Overhead cost and direct labor cost.
Indirect cost are those costs which are not directly allocated to product units as well as not directly identifiable that's why these are part of overhead cost and overhead cost is part of conversion cost.
The conversion cost is the amount of money it takes to change a resource into a product. Going from something raw to a finished product would almost always have a cost, that would be the conversion cost. The cost at which it takes to convert from one thing to another.
Conversion
Prime cost is that cost component without which no production is possible while conversion cost is that cost which required to convert raw materials into finished goods like direct labor and overhead costs.
The fact that cost which requires to convert raw material into finished goods like direct labor and overhead differentiate the prime cost from conversion cost which includes raw material and labor.