Question

Production cost refers to prime cost plus

• A. Factory overheads
• B. Factory and administration overheads
• C. Factory, administration and sales overheads
• D. Factory, administration, sales overheads and profit

Answer 1

Answer:

A. Factory overheads

Production cost, in the context of cost accounting, is generally referred to as the sum of prime cost and additional overheads. These additional overheads typically include indirect costs associated with manufacturing, which are not part of the direct material or direct labor costs. Therefore, understanding production cost involves considering the prime cost and incorporating the relevant factory overheads. This ensures a comprehensive calculation of the total cost of producing goods.