For manufacturing firms, it is essential that they differentiate among direct materials, direct labor, and manufacturing overhead in order to identify and manage their total product costs For planning purposes, managers must be careful to consider the relevant range because it is only within this relevant range that total fixed costs remain constant

Costs can be broadly classified as either fixed or variable costs. However, in order for managers to manage effectively, these two cost classifications are often further expanded to include mixed, step, prime, and conversion costs

manufacturing overhead — costs incurred in the production process that are not economically feasible to measure as direct material or direct labor costs; examples include indirect material, indirect…. relevant range — quantitative range of units that can be produced based on the company’s current productive assets; for example, if a company has sufficient fixed assets to produce up to 10,000…. conversion costs — total of labor and overhead for a product; the costs that “convert” the direct material into the finished product. product costs — all expenses required to manufacture the product: direct materials, direct labor, and manufacturing overhead.