Conversion
cost refers to the total expenses incurred during the process of converting raw
materials into finished goods or products. It includes the direct labor cost
and manufacturing overhead cost. Direct labor cost represents the wages or
salaries paid to the workers directly involved in the production process, such
as machine operators or assembly line workers. Manufacturing overhead cost
comprises all other indirect costs associated with the production process, such
as factory utilities, equipment depreciation, factory supervision, and
maintenance expenses. Conversion cost is a critical component in determining
the overall cost of production and is often used to calculate the cost per unit
of finished goods.
Conversion cost includes:
a) Direct
materials and direct labor
b) Direct labor and manufacturing overhead
c) Direct materials and manufacturing overhead
d) Direct
labor, Direct materials, and
manufacturing overhead
Answer:
b) Direct labor and manufacturing overhead
One of the
following is not a conversion cost?
a) Factory
rent
b) Factory
utilities
c) Factory
supervisor's salary
d)
Depreciation on factory equipment
Answer:
a) Factory rent
Conversion
cost is also known as:
a) Prime
cost
b) Direct
cost
c) Indirect
cost
d)
Manufacturing cost
Answer:
d) Manufacturing cost
The formula
for calculating conversion cost is:
a) Direct
materials + Direct labor
b) Direct
labor + Manufacturing overhead
c) Direct
materials + Manufacturing overhead
d) Direct
materials + Direct labor + Manufacturing overhead
Answer:
b) Direct labor + Manufacturing overhead
Example of a
conversion cost?
a) Raw
materials
b) Sales
commission
c) Depreciation
on office furniture
d) Factory
supplies
Answer:
d) Factory supplies
Conversion
cost is incurred during which stage of the production process?
a) Raw
material acquisition
b)
Production planning
c) Convert raw
materials into finished goods
d) Product
distribution
Answer:
c) Conversion of raw materials into finished goods
Direct labor
cost?
a) Factory
supervisor's salary
b) Wages of
machine operators
c) Indirect
material cost
d)
Depreciation on factory building
Answer:
b) Wages of machine operators
Example of
manufacturing overhead cost?
a) Direct
materials cost
b) Direct
labor cost
c) Factory
insurance
d) Cost of
goods sold
Answer:
c) Factory insurance
Conversion
cost is most commonly used in which type of industry?
a) Service industry
b) Retail
industry
c)
Manufacturing industry
d) Financial
industry
Answer:
c) Manufacturing industry
The
conversion cost per unit is calculated by dividing the total conversion cost
by:
a) Number of
units produced
b) Direct
labor cost per unit
c)
Manufacturing overhead cost per unit
d) Direct
materials cost per unit
Answer:
a) Number of units produced
Which of the
following costs would be included in conversion cost?
a) Advertising
expenses
b) Shipping
and handling costs
c) Wages of
assembly line workers
d) Office
supplies
Answer:
c) Wages of assembly line workers
Conversion
cost is an essential component for calculating:
a) Gross profit
b) Net income
c) Cost of
goods sold
d) Operating
expenses
Answer:
c) Cost of goods sold
Which of the
following statements about conversion cost is true?
a) It is
only applicable to direct labor costs.
b) It
represents the total cost of production.
c) It excludes all indirect costs.
d) It is only
relevant in service industries.
Answer:
b) It represents the total cost of production.
Which of the
following costs is classified as a manufacturing overhead cost?
a) Direct materials cost
b) Direct labor cost
c) Factory
rent
d) Sales
commissions
Answer:
c) Factory rent