BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Detailed explanation-1: -The three general categories of costs included in manufacturing processes are direct materials, direct labor, and overhead.
Detailed explanation-2: -A prime cost is the total direct costs of production, including raw materials and labor. Indirect costs, such as utilities, manager salaries, and delivery costs, are not included in prime costs. The prime cost equation is equal to the cost of raw materials plus direct labor.
Detailed explanation-3: -Prime costs comprise a company’s direct material and direct labor costs. Businesses calculate prime costs when analyzing manufacturing expenses, efficiency, and profitability. Accountants break down product costs into three categories: direct material, direct labor, and manufacturing overhead.
Detailed explanation-4: -In general, three types of expenses are included in the cost of products: the cost of direct materials, direct labor costs and manufacturing overhead costs.