The Reason for Combining Direct Labor and Overhead Costs Together

question 16

Multiple Choice

The reason for combining direct labor and overhead costs together and calling them "conversion costs" is that

• A) they both are direct costs of production.
• B) the equivalent unit amount for direct materials will be the same as that for direct labor and overhead costs.
• C) both types of costs usually are incurred uniformly throughout the production process.
• D) the costs for direct labor and overhead are not accounted for separately.

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Definitions:

Social Security

A government program designed to provide financial support to people who are retired, disabled, or unable to work.

Corporate Sector

The portion of an economy comprised of corporations, including businesses and enterprises, engaged in commercial or industrial activities.

Medicare Tax

A federal payroll tax imposed on both employees and employers to fund Medicare, the United States' health care program for the elderly and some disabled individuals.

Tax Shifting

The process by which the economic burden of a tax is passed from one entity to another, such as from businesses to consumers.