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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Distinguish between prime costs and conversion costs.

To determine

Prime cost:

Prime cost refers to a cost which is directly involved in the process of manufacturing an item. Prime cost includes direct material, and direct labor costs.

Conversion cost:

A conversion cost refers to the cost of converting the raw materials into a finished product. Conversion cost includes direct labor as well as factory overhead costs.

To distinguish: Between the prime cost, and the conversion cost.

Explanation

  • Prime cost is a cost which is directly involved in the process of manufacturing the goods or products, whereas, conversion cost is a cost which is involved in converting the ...

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