Question

Compute conversion costs given the following data: direct materials, $361,300; direct labor, $195,300; factory overhead, $216,700 and selling expenses, $42,200. a.$412,000 b.$773,300 c.$578,000 d.$174,500

Answer 1

a. $412,000

Step-by-step explanation:

Conversion cost is the combination of direct labor and manufacturing overhead which directly or indirectly are necessary to produce a product other than the direct raw materials.

We know,

Conversion costs = Direct Labor + Manufacturing Overhead

Here,

Manufacturing overhead = Indirect material + Indirect Labor + Indirect overhead (including variable and fixed overhead)

Given,

Direct labor = $195,300

Manufacturing overhead = Factory overhead = $216,700

Selling expenses will not be included because it is not a direct or indirect overhead expense.

Therefore,

Conversion costs = $195,300 + $216,700

Conversion costs = $412,000