Classifying R&D cost in total product cost While estimating the total product cost for a chemical plant, expenditure on research and development (R&D) is categorized under which heading?

Introduction / Context:
Total product cost classifications help estimate annual manufacturing cost and selling price. Understanding where to place research and development expenditures ensures consistency in cost reports and comparability across projects and plants.

Given Data / Assumptions:

• Standard chemical engineering cost breakdowns are used.
• R&D here refers to ongoing technical development and support connected with products and processes.
• We consider annual accounting, not capitalized R&D for special cases.

Concept / Approach:
Cost handbooks typically group R&D together with administrative, distribution, and selling expenses under “general expenses”. These are not direct production costs tied to unit throughput, nor are they fixed capital-related charges; rather they are period costs incurred to support business operations and future products.

Step-by-Step Solution:

Verification / Alternative check:
Classic references (chemical process design texts) show R&D under general expenses when computing total product cost.

Why Other Options Are Wrong:

• Overhead cost: Usually plant overhead tied to production facilities, not R&D.
• Fixed expenses: Include taxes, insurance, depreciation; not R&D.
• Direct production cost: Includes raw materials, utilities, direct labor; not R&D.

Common Pitfalls:
Capitalizing R&D universally; in many product-cost estimates, routine R&D is treated as a period general expense.

Final Answer:
General expenses