Unit 2 - CHAP 5

Question 1

WHAT IS PRODUCTION COST AND WHAT DOES IT INCLUDE?

Answer 1

ALL COSTS ASSOTIATED WITH THE PURCHASE OR PRODUCTION OF A GOOD FORM THE COST OF INVENTORY

IT INCLUDES DIRECT LABOUR, DIRECT MATERIALS AND ALLOCATED AMOUNT FOR MANUFACTURING OVERHEAD

Question 2

What is Prime Cost?

Answer 2

Direct costs used to manufacture a product
or
Direct costs tied to a product

Question 3

What is the formula to calculate Prime costs?

Answer 3

Direct material costs + direct labour costs = prime costs

Question 4

What are Conversion Costs?

Answer 4

All other manufacturing costs (not prime costs) other than direct material costs
or
a cost of converting the raw materials into the finished good

Question 5

What is the formula to calculate conversion costs?

Answer 5

direct labour + manufacturing overhead costs = conversion costs

Question 6

what is required when to transform a direct material into final product?

Answer 6

conversion costs

Question 7

What is included in conversion costs?

Answer 7

Direct labour costs, variable manufacturing overhead costs and fixed manufacturing overhead costs

Question 8

What are period costs?

Answer 8

costs that accountants do not count as prodution costs