Which set describes the three types of expense?

Which set describes the three types of expense?

• A. Production (rent), Selling and distribution (packaging), Admin (auditors fees)
• B. Marketing, Travel, IT
• C. Manufacturing, Shipping, Salaries
• D. Interest, Depreciation, Taxes

Answer: (A)

Costs are grouped by function: production, selling and distribution, and administration. This three-way classification shows what each cost is used for in the business: production costs relate to making the product, selling and distribution costs cover marketing and delivering it to customers, and administration costs are the overheads of running the business. The set described fits best because it picks representative items from each function: a rent tied to producing goods belongs with production costs; packaging is part of selling and distribution costs since it relates to getting the product ready for sale and shipment; auditors’ fees fall under administration costs as part of general overheads. This combination demonstrates the standard functional grouping used in cost accounting. Other options mix activities that don’t align with the three standard functions or omit one of the categories, so they don’t reflect the typical way costs are classified by function.

Costs are grouped by function: production, selling and distribution, and administration. This three-way classification shows what each cost is used for in the business: production costs relate to making the product, selling and distribution costs cover marketing and delivering it to customers, and administration costs are the overheads of running the business.

The set described fits best because it picks representative items from each function: a rent tied to producing goods belongs with production costs; packaging is part of selling and distribution costs since it relates to getting the product ready for sale and shipment; auditors’ fees fall under administration costs as part of general overheads. This combination demonstrates the standard functional grouping used in cost accounting.

Other options mix activities that don’t align with the three standard functions or omit one of the categories, so they don’t reflect the typical way costs are classified by function.