DEPRECIATION EXPENSE is the amount deducted from gross profit to allow for a reduction in the value of something because of its age or how much it has been used. When you buy and own equipment, your business may be entitled to deduct a depreciation expense.
CONVERSION COSTS is Direct Labor + Manufacturing Overhead.
ACCRUAL BASIS OF ACCOUNTING is wherein revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. This is the accounting basis that generally is required to be used in order to conform to generally accepted accounting principles (GAAP) in preparing financial statements for external users.
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