Enter the total direct labor cost and the manufacturing overhead into the calculator to determine the conversion cost.
- Cost of Goods Manufactured Calculator (COGM)
- Manufacturing Overhead Calculator
- Average Variable Cost Formula
- Total Manufacturing Cost Calculator
Conversion Cost Formula
The following formula is used to calculate a conversion cost.
CC = DL + MO
- Where CC is the conversion cost ($)
- DL is the direct labor cost ($)
- MO is the manufacturing overhead
Conversion Cost Definition
A conversion cost is a measure of the total amount of cost it takes to convert raw material into a manufactured good.
Conversion Cost Example
How to calculate conversion cost?
- First, determine the direct labor cost.
This will be the cost of any labor that was directly involved in the process of manufacturing the good.
- Next, determine the total manufacturing overhead.
The manufacturing overhead will be the total overhead cost required for the manufacturing process to occur and the good to be produced.
- Finally, calculate the conversion cost.
Calculate the conversion cost by adding the direct labor cost to the manufacturing overhead.
A conversion cost is the total amount of cost it takes to bring a manufactured product from the raw material into a completed good.
The best methods for reducing conversion costs involve improving efficiency that reduce both direct labor and manufacturing overhead.