Total cost refers to?

Total cost refers to?

• A. Tax costs
• B. Direct costs only
• C. Selling costs only
• D. Full production and non-production costs

Answer: (D)

Total cost means all costs incurred to produce and deliver a product or service, not just the manufacturing part. It includes production costs (direct materials, direct labor, and manufacturing overhead) plus non-production costs (selling, distribution, administration, and other overhead), covering both fixed and variable elements. That’s why the full, or complete, cost is made up of production plus non-production costs. Tax costs are external charges and aren’t part of cost accounting calculations for a product. Focusing on only direct costs leaves out overhead, and focusing on only selling costs misses the production costs entirely.

Total cost means all costs incurred to produce and deliver a product or service, not just the manufacturing part. It includes production costs (direct materials, direct labor, and manufacturing overhead) plus non-production costs (selling, distribution, administration, and other overhead), covering both fixed and variable elements. That’s why the full, or complete, cost is made up of production plus non-production costs. Tax costs are external charges and aren’t part of cost accounting calculations for a product. Focusing on only direct costs leaves out overhead, and focusing on only selling costs misses the production costs entirely.