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.
Mechanical Engineering
Industrial Engineering and Production Management
Difficulty: Easy
Choose an option
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AFactory overheads
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BFactory and administration overheads
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CFactory, administration and sales overheads
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DFactory, administration, sales overheads and profit
Answer
Correct Answer: Factory overheads
Explanation
DefinitionsPrime 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 AnswerFactory overheads