Question

The three basic elements of manufacturing cost are direct materials, direct labor, and :

cost of goods manufactured

cost of goods sold

work in process

manufacturing overhead

Answer 1

manufacturing overhead. Correct.

Direct Material and Direct labor are direct costs which forms the part of manufacturing cost and Manufacturing overhead are variable costs which form part of manufacturing cost.

Answer 2

Concepts and reason

Cost of goods manufactured: Cost of goods manufactured is the total manufacturing cost incurred for goods manufactured during the year.

Cost of goods sold: Cost of goods sold is the cost of the goods which are sold by the company. The cost of goods sold could be either the purchase cost of the goods sold or manufacturing cost of goods manufactured.

Work in process: Work in process is the goods which are yet to be produced but are in the process of production. These are the unfinished goods which are being processed or would be processed next year.

Fundamentals

Manufacturing costs: Manufacturing costs are the total costs which are required to be incurred so as to manufacture the goods.

Manufacturing overhead: The manufacturing overhead is the factory cost incurred in manufacturing the goods. The manufacturing overhead includes both variable cost and fixed costs. These cost include factory rent paid, depreciation of factory machinery and other factory related costs.

Direct material: The raw material is the basic component required to manufacture the goods. These raw material are processed into finished goods. Raw material is one of the direct costs incurred in manufacturing the goods.

Direct labor: Direct labor is another direct cost incurred in manufacturing the goods. Certain manufacturing process requires manual intervention and therefore wages are paid to the workers of the factory, this wages paid is known as direct labor cost.

The cost of goods manufactured is the total cost incurred in goods which are manufactured during the year and includes manufacturing costs. The total manufacturing costs is used to calculate the cost of goods manufactured and so cost of goods manufactured is not the basic element of manufacturing costs. The cost of goods sold is the manufacturing cost incurred to produce the goods which are sold and cost of goods sold is calculated from the cost of goods manufactured which includes cost of total manufactured product and so cost of goods sold is not three element of manufacturing costs. The work in process are the goods which are in processed and these goods are being processed due to manufacturing costs incurred and so work in process is not an element of manufacturing costs.

Thus, cost of goods manufactured, cost of goods sold and work in process are not the basic three element of manufacturing costs.

Manufacturing overhead is the cost incurred other than direct material and direct labor which is required for the production of business and is therefore part of total manufacturing costs.

Thus, manufacturing overhead is the third basic element of manufacturing cost.

Ans:

Manufacturing overhead is the third basic element of manufacturing cost.