Final answer:
In cost accounting, direct labor costs plus manufacturing overhead costs are known as conversion costs. These costs are vital for a firm to understand and manage its production process effectively.
Step-by-step explanation:
Direct labour costs plus manufacturing overhead costs equal conversion costs. This combination includes both the direct labor involved in making a product and the indirect costs associated with the production process, like maintenance and utilities of machines. On the other hand, prime costs consist of direct labor and direct materials only. The costs of operating a business overall, such as administration and sales expenses, represent operating costs. Meanwhile, equivalent costs are used in cost accounting to denote costs incurred during a process and then assign them to a number of units processed during a period. Understanding these costs is crucial for economic decision-making in a firm, whether it concerns the day-to-day operations or long-term strategies such as achieving economies of scale or avoiding diseconomies of scale.