Which of the Following Assertions Is TRUE Concerning Conversion Costs

question 17

Multiple Choice

Which of the following assertions is TRUE concerning conversion costs?

• A)Direct labour costs are always included in conversion costs.
• B)The conversion period (for conversion costs calculation)can only include one operation.
• C)When conversion costs are estimated to be over 80% complete, then the cost-benefit constraint requires us to use 100% as the estimate.
• D)Conversion costs are impossible to estimate with any reliability.
• E)The conversion period often includes several operations, and it may be impossible to estimate conversion costs with any reliability in some cases.

---

Definitions:

Perpetual Inventory Records

This is an inventory management system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Direct Materials

Raw materials that are traceable to the manufacturing of a product and are an integral part of the finished product.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, calculated before the period begins based on estimated costs and activity levels.

Direct Materials Used

Direct Materials Used are raw materials that are directly incorporated into a finished product and are a major part of manufacturing costs.