Question

Direct cost + Factory Overhead is called:
a) Prime Cost
b) Cost of Production
c) Works Cost
d) Cost of Sales​

Answer 1

Answer:

b) Cost of Production is answer

Answer 2

Direct cost + factory overhead is called "Works cost."

Explanation:

• Direct cost and factory overhead are elements of the cost sheet and, when added together, result in "Works cost."
• Cost sheet is prepared to show the different costs used for the production process of a product from start to finish and helps estimate an ideal price for selling the product. It is also used as a basis for cost control measures and helps in determining profit margin.
• Direct costs include the costs that are incurred directly, like direct materials, direct wages, and direct expenses. Factory overhead includes costs that are incurred in the manufacturing process.
• To calculate the "Works cost" factory overhead is added to the direct cost.