Which of the following are product costs for a manufacturer

Which of the following are product costs for a manufacturer? (Check all that apply.) Check all that apply. Store rent Depreciation on the factory equipment Depreciation on the office equipment Sales commissions to Read about this you know the answer I know it Think so No idea

Solution

Product cost for a manufacturer is the expenses required in the manufacturing process of merchandise. It also referred as manufacturing cost and classified as direct and indirect product cost. Easily traceable direct material and direct labor are direct product cost where as manufacturing overhead is indirect product cost.

Manufacturing overhead also known as factory overhead or production overhead and includes the depreciation or the rent on the factory building, depreciation on the factory equipment, supervisors in the factory, the factory quality control department, factory maintenance employees, electricity and gas for the factory, indirect factory supplies, etc.

Product cost includes a variety of other expenses too. As store room is used for raw material storage used in future production, its rent should be considered as product cost.

Expenses that are outside of the factory, such as selling, general and administrative expenses are not product costs.

Hence option “Direct material, Store rent, Depreciation on factory equipment” is correct answer.