what is conversion cost
Conversion Costs. A conversion cost is the amount incurred during the transformation of raw materials inventory into finished goods. In other words, this is the amount of direct labor and overhead costs that are required to turn raw materials into an actual product.ruce is trying to figure out what his conversion costs are for the quarter in order to estimate his finished inventory for the interim financial statements. Bruce identifies the following expenses totaling $50,000.
Prime Cost are a business's expenses for the materials and labor it uses in production. Prime cost is a way of measuring the total cost of the production inputs needed to create a given output. Conversion costs are those costs required to convert raw materials into finished goods that are ready for sale.onversion Cost is the combination of direct labors cost and factory overheads cost. Direct labor and FOH are the two costs which convert raw materials into finished goods therefore it is called conversion cost.