Choices b and d. Conversion costs do not include direct materials. Prime costs include direct materials and direct labor, which are not part of manufacturing overhead.
Choice c. The cost of goods manufactured equals the cost of goods sold of $100,000 plus the increase in the inventory account of $30,000.
Choices a and b. The average fixed cost per unit decreases, rather than increases, as the level of activity increases. Total fixed costs do not change as the level of activity decreases (within the relevant range).
Choices c and d. A common cost is one type of indirect cost, rather than direct cost. A sunk cost is not a differential cost.
