Examlex

Solved

What Are the Three Criteria a Company Should Use to Evaluate

question 131

Essay

What are the three criteria a company should use to evaluate and choose a cost driver? Briefly explain each of the three criteria.


Definitions:

Conversion Costs

Costs required to convert raw materials into finished products, including direct labor and manufacturing overhead.

Equivalent Units

A metric used in cost accounting to express the amount of work completed by manufacturers in terms of fully finished units.

Process Costing

A costing method used in manufacturing where costs are allocated to batches of products, suitable for homogeneous products.

Conversion Costs

The total expenses of direct labor plus manufacturing overhead costs, spent in the process of transforming raw materials into completed goods.

Related Questions