In manufacturing, conversion costs are the expenses incurred to convert raw materials into finished goods. This calculator helps you estimate the conversion costs by considering labor and overhead costs.
How to Calculate Conversion Cost
To calculate the conversion cost, follow these simple steps:
- Enter the total labor cost involved in production.
- Input the total overhead cost, which includes indirect costs like utilities, depreciation, etc.
- If you want to calculate the conversion cost per unit, enter the total number of units produced (optional).
- Click the 'Calculate Conversion Cost' button to get the total conversion cost.
Formula Used
The conversion cost formula is:
- Total Conversion Cost = Labor Cost + Overhead Cost
- Cost per Unit = Total Conversion Cost / Units Produced (optional)
Using this formula, you can easily determine the total cost incurred to convert raw materials into finished products, as well as the cost per unit of production.
Example Calculation
Let's say you have a labor cost of $5,000 and overhead costs of $3,000, and you produced 500 units. The total conversion cost would be:
Total Conversion Cost = 5000 + 3000 = $8,000
If you want to calculate the cost per unit, divide the total conversion cost by the number of units produced:
Cost per Unit = 8000 / 500 = $16.00
This gives you the total conversion cost as well as the cost per unit.