ECONOMICS

COST ACCOUNTING

MANUFACTURING OVERHEAD

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Which of the following is not considered as a component of product cost?
A
Property taxes on factory building
B
Direct materials
C
Indirect labor
D
Advertising
Explanation: 

Detailed explanation-1: -Advertisement is a selling cost and not a production cost as it is not directly related to the production of the good. Its is usually classified as a sunk cost or an indirect cost. All other costs are directly related to the production of a good.

Detailed explanation-2: -The correct answer is D. Cost accountant’s salary is not considered product cost because product cost is those expenses incurred in the production process of a product sold to the customers. Direct material, direct labor, and manufacturing overhead are all included in product costs.

Detailed explanation-3: -The costs involved in creating a product are called Product Costs. These costs include materials, labor, production supplies and factory overhead. The cost of the labor required to deliver a service to a customer is also considered a product cost.

Detailed explanation-4: -The three general categories of costs included in manufacturing processes are direct materials, direct labor, and overhead.

There is 1 question to complete.