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7 February, 08:45

LO 5.2What is the difference between prime costs and conversion costs?

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  1. 7 February, 08:48
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    Material cost + Labor cost are called 'Prime Costs'

    Labor cost + Overhead cost are called 'Conversion Costs'

    Explanation:

    Prime cost is defined as material cost+Labor cost. All the material costs and labour costs are included in the definition of the prime cost.

    Conversion cost is defined as Labor cost + overhead cost. All the costs related to labor and overhead are included in the definition of Conversion cost.
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