Conversion Costs

- are expenses incurred when turning raw materials into a product.

- include direct labor and overhead expenses.

47. During the month of May, Bennett Manufacturing Company purchased $43,000 of raw materials. The manufacturing overhead totaled $27,000 and the total
manufacturing costs were $106,000. Assuming a beginning inventory of raw materials of $8,000 and an ending inventory of raw materials of $6,000, direct labor
must have totaled:

a. $34,000.
b. $38,000.
c. $36,000.
d. $45,000.

*Solution:

8,000 - Beg. Raw Materials Inventory

(+) 43,000 - Purchases of Raw Materials

51,000 - Total Raw Materials Available for Use

(-) 6,000 - End. Raw Materials Inventory

45,000 - Direct Materials used in production - DM

34,000 - Direct Labor - DL

27,000 - Factory Overhead - FOH

106,000 - Total Manufacturing Costs