Question

4) Product (or manufacturing) costs consists of a) Direct materials, direct labor, and selling costs b) Direct materials, direct labor, manufacturing overhead, and operating expenses c) Administrative cost and conversion cost d) Selling and administrative costs

Answer 1

4)Answer is b)

b) Direct materials, direct labor, manufacturing overhead, and operating expenses

Note:

Product cost:

Product cost are cost which is incurred to create a product.

It include direct material, direct labor and manufacturing overhead. (Indirect material & indirect labor).

Direct material:

DM cost are the cost incurred to the material directly Involved in the product.

Direct labor:

DL cost are insurance ,wages and other cost paid to employees who is directly Involved in manufacturing product.

Manufacturing overhead:

It is the overhead cost related to operate the machinery.

Manufacturing overhead are indirect material & indirect labor.

Indirect material:

These materials are used in the production but not include in product. Eg; oil,glue,tape etc.

Indirect labor:

Labor who are not directly Involved in production.eg;supervisor, security etc.

Summary:

Definition & items of product cost with notes.