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Conversion Cost

  • Cost incurred to convert raw materials or components into finished or semi-finished products.
  • This normally includes costs which are specifically attributable to units of production, i.e., direct labour, direct expenses and subcontracted work, and production overheads as applicable in accordance with either the direct cost or absorption costing method.
  • Production overheads exclude expenses which relate to general administration, finance, selling and distribution.

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