Question

Conversion cost includes cost of converting _________ into _________.

• A. Raw material, WIP
• B. Raw material, Finished goods
• C. WIP, Finished goods
• D. Finished goods, Saleable goods

Answer 1

The correct option is B Raw material, Finished goods

Putting up raw material in a process and applying the labour along with overheads for converting the raw material is a process of manufacturing.

Conversion cost includes, cost of raw material, direct labour and factory overheads. This is the process of converting the raw material in to finished goods.