Pcom incurred the following costs in the month of July 2010: Direct materials $4

Question

Pcom incurred the following costs in the month of July 2010:

            Direct materials                                   $41,000

            Direct labor                                         $13,000

            Manufacturing overhead                     $44,000

            Selling expenses                                  $18,000

            Administrative expenses                     $15,000

1. What were Pcom’s conversion costs during the month of July?

2. What were Pcom’s prime costs during the month of July?

Explanation / Answer

1. Conversion costs = Direct labor + Manufacturing overhead = $13,000 + $44,000 = $57,000

2. Prime cost = Direct materials + Direct labor = $41,000 + $13,000 = $54,000

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