Which of the Following Is an Explicit Cost of Production

question 96

Multiple Choice

Which of the following is an explicit cost of production?

• A) wages paid to workers
• B) the electric bill
• C) purchases of raw material
• D) Only answers A and B are explicit costs because the purchases of raw material is only an opportunity cost.
• E) Answers A, B, and C are all correct.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate overhead costs to products based on a certain activity base, such as labor hours or machine hours.

Machining Department

A specific sector within a manufacturing facility where machining processes such as cutting, drilling, or milling are performed on materials.

Machine-Hour

A unit of time measurement for the operation of a machine, often used to allocate manufacturing costs in product costing.

Predetermined Overhead Rate

A method for distributing manufacturing overhead across production units, utilizing projected costs.