Imagine you run a small bakery. You start the day with bags of flour, cartons of eggs, and blocks of butter. By mid‑morning, those ingredients have become trays of golden‑brown pastries. This transformation—turning raw materials into finished goods—is what manufacturers do every day, and the accounting system must track every penny of cost as it flows from raw materials to the final product. In this chapter, we explore the conversion process and the cost accounting methods that make that tracking possible.