Conversion Costs (and Conversion Cost Pricing)

Home » CMA Glossary Term » Cost Accounting » Conversion Costs (and Conversion Cost Pricing)

Conversion costs are the combined expenses of direct labor and manufacturing overhead incurred to transform raw materials into finished goods. These costs are crucial in determining the total production cost and are used in conversion cost pricing to set product prices. By focusing on efficiency, businesses can optimize these costs to enhance profitability. Conversion costs are a fundamental concept in manufacturing and production accounting.

CMA Exam Academy 16-Week Accelerator Program