ECONOMICS

Detailed explanation-1: -The total price paid for the resources used to manufacture a product or create a service, such as raw materials, labour, and others, is called the production cost. The product/service created is to be sold to consumers. In the case of mining companies, the royalties owed are also treated as part of the production cost.

Detailed explanation-2: -Direct material costs are the costs of raw materials or parts that go directly into producing products.

Detailed explanation-3: -Raw materials are categorized as direct expenses on a company’s income statement because they contribute directly to the making of a product or delivery of a service. As raw material costs change along with production volumes, they are considered to be variable costs.

Detailed explanation-4: -Cost of goods sold (COGS) includes all of the costs and expenses directly related to the production of goods. COGS excludes indirect costs such as overhead and sales & marketing.

Detailed explanation-5: -What is Material Cost? Material cost is the cost of materials used to manufacture a product or provide a service. Excluded from the material cost is all indirect materials, such as cleaning supplies used in the production process.