Question

BUSI 033 Chapter 2 (Test #1) inclass Quiz For each item, identify all applicable cost labels by checking the correct box(es). Assum automobiles. (More than one answer may be applicable) DirectDirect Materials Labor Prime Conversion Costs FOH Costs Car Engines Wages of the engine installer

Answer 1

			Direct	Direct	FOH	Prime	Conversion
			Material	labour		Cost	Cost
Car Engines			Yes			Yes
wages of the Engine Installer				Yes		Yes	Yes
Note: Car engines is Direct material and is part of Prime cost as well.
Prime cost = Direct material cost+ Direct labour cost
Note: Conversion cost = Direct labour cost + Factory Overheads
Wages paid for engine installer is a direct labour inveolved in production
Hence, it is a part of direct labour cost and also part of part of Prime cost and Conversion cost.