Conversion costs refer to the expenses incurred to convert raw materials into finished goods. These costs typically include:
- Direct Labor: The labor cost directly involved in the manufacturing process.
- Indirect Labor: Wages paid to workers who assist in the production process but do not directly work on the product.
- Indirect Materials: Costs of materials that cannot be directly attributed to the finished product but are necessary for production.
However, depreciation is not included in conversion costs. Depreciation represents the reduction in value of physical assets over time, such as machinery or equipment used in production. While it is a manufacturing cost, it falls under overhead or fixed costs rather than conversion costs directly associated with turning raw materials into final products.
Therefore, the correct answer is a) depreciation.