What distinguishes two manufacturing cost classification systems: direct and indirect, prime and conversion?

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What distinguishes two manufacturing cost classification systems: direct and indirect, prime and conversion?




Answer: A direct cost is any cost that can be traced to the cost object in an economically feasible way. All direct costs are defined as prime costs. Indirect costs are related to a specific cost object but cannot be traced in an economically feasible way. All indirect manufacturing costs are conversion costs that may also include direct manufacturing labour. Classification of direct and indirect depends on the cost object.

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