A company estimates the following expenditures: preferred dividends pa

A company estimates the following expenditures: preferred dividends paid of $22,200; wages paid to workers of $49,600; overhead costs of $24,300; raw materials of $45,000; shipping costs of $12,100. What are the total production costs?

A) $131,000
B) $134,500
C) $142,100
D) $153,200

ANSWER

Answer: A
Explanation: A) Production costs include, among other items, the wages paid to workers, the raw materials for manufacturing products, the overhead (such as electricity, water, plant space, and so on), and the shipping costs that get the product to the customer. Thus, the total production cost is: $49,600 + $24,300 + $45,000 + $12,100 = $131,000. Preferred dividends are considered a financing cost that is often paid in quarterly payments.