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GCE Financial Accounting 1989 Question 40

Question 40

Manufacturing Accounts

Factory cost consists of

  1. A.direct material and factory overhead
  2. B.direct labour and direct expenses
  3. C.direct labour and factory overhead
  4. D.direct materials, direct labour, direct expenses and factory overhead
  5. E.direct expenses and factory overhead.
Show the answer and explanation

Answer: D (direct materials, direct labour, direct expenses and factory overhead)

Explanation

Factory (production) cost = prime cost (direct materials, labour, expenses) + factory overheads.