Question

LO 5.2What is the conversion cost to manufacture insulated travel cups if the costs are: direct materials, $17,000; direct labor, $33,000; and manufacturing overhead, $70,000?

$16,000
$50,000
$103,000
$120,000

Answer 1

The correct answer is $ 103,000.

Step-by-step explanation:

Conversion costs are the costs incurred for turning raw materials into finished products. If you add direct labor costs and manufacturing costs, the sum that you get will be the conversion cost. In other words, conversion costs equal the cost of production minus raw material cost.

So here Conversion cost can be calculated by adding labour and manufacturing cost. Raw material cost is not included in conversion cost.

Coversion cost = 33,000 + 70,000 = 103,000 dollars