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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Define prime cost and conversion cost. Why can’t prime cost be added to conversion cost to get total product cost?

To determine

Explain the terms prime costs and conversion costs. Also, describe the reason why prime cost is not added to the conversion cost to compute total product cost.

Explanation

Prime Cost:

Prime cost can be defined as the summation of direct labor cost and direct material cost. The amount of indirect cost is not included while computing prime cost.

Conversion Cost:

Conversion cost can be defined as the summation of manufacturing overhead and direct labor...

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