The three basic elements of manufacturing cost are direct materials, direct labor, and:
A) cost of goods manufactured.
B) cost of goods sold.
C) work in process.
D) manufacturing overhead.

Question

Quizplus · Accepted Answer

The third basic element of manufacturing cost is manufacturing overhead, which includes all indirect costs associated with manufacturing such as rent, utilities, and depreciation of equipment. Direct materials and direct labor are the two direct costs that can be easily traced to a specific product. Cost of goods manufactured and cost of goods sold are not elements of manufacturing cost, but rather are accounting measures used to track the flow of inventory through the production process and ultimately to the customer.

The Three Basic Elements of Manufacturing Cost Are Direct Materials