Selling and Administrative Expenses Are Subtracted from the Cost of Goods

question 66

True/False

Selling and administrative expenses are subtracted from the cost of goods sold to obtain operating profit.

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Definitions:

Direct Materials

Raw materials used in the manufacturing of a product, which can be directly attributed to that product.

Direct Labour

Direct Labour refers to the wages and salaries of employees who are directly involved in the production of goods or services, considered as a variable cost.

Direct Labour Cost

The total expense a company incurs for paying the wages of direct labor employees directly involved in producing goods or services.

Overhead Rate

The rate used to allocate manufacturing overhead to individual units of product, typically based on a standard measure such as labor hours or machine hours.