What Does Conversion Cost Consist Of

question 68

Multiple Choice

What does conversion cost consist of?

• A) Manufacturing overhead cost.
• B) Direct materials and direct labour cost.
• C) Direct labour cost.
• D) Direct labour and manufacturing overhead cost.

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Definitions:

Variable Costs

Variable costs are expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.

Break-even Point

The production level or sales volume at which total revenues equal total costs, resulting in no profit or loss.

Variable Costs

Costs that vary directly with the level of production or the volume of output.

Fixed Costs

Costs including rent, salaries, and insurance that stay the same regardless of production or sales amounts.