Understanding Costs and Pricing

Which of the following best describes direct materials?

• Labour used in the factory but not directly in production

• Materials that form a part of the item produced

• Costs that vary with the amount produced

• Other expenses besides direct labour

What are indirect materials?

• Materials not used in manufacturing

• Raw materials forming part of the final product

• Materials used in the process but not part of the final product

• Tools used in office administration

Which cost refers to labour directly involved in manufacturing the goods?

• Indirect labour

• Factory overheads

• Direct labour

• Prime cost

What is included in prime cost?

• Only direct labour

• Total direct costs (raw materials + direct labour)

• Fixed costs and variable costs

• Labour used indirectly in manufacturing

Which of the following represents costs that remain constant regardless of output?

• Variable costs

• Total cost of production

• Factory overheads

• Fixed costs

What is the selling price of a product?

• The cost of one unit

• The materials used

• The price the item is sold for

• The profit margin

What is the mark-up on a product?

• The cost of one unit produced

• The total cost of production

• The profit made on the goods produced

• The amount of variable cost

Which of the following defines unit cost?

• Cost of one item produced

• Total cost of all units

• Selling price of the product

• Amount added as mark-up