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Costing terminology: definition of production (works) cost Production cost is defined relative to prime cost. Identify the correct addition to prime cost to obtain production cost. Choose the correct completion.

Difficulty: Easy

Factory overheads
Factory and administration overheads
Factory, administration and sales overheads
Factory, administration, sales overheads and profit

Correct Answer: Factory overheads

Explanation:

Definitions
Prime cost = Direct material + Direct labour + Direct expenses.Production (works) cost = Prime cost + Factory overheads.Total cost (cost of sales) adds administration and selling/distribution overheads; profit added yields selling price.

Final Answer
Factory overheads

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