Northwest Packing Inc. estimates the following expenditures: total shi

Northwest Packing Inc. estimates the following expenditures: total shipping costs of $1,100; wages paid to workers of $9,600; overhead costs of $4,300; raw materials of $5,000; and, dividends and interest paid of $2,200.

What is the total production cost from all of these costs?
A) $22,200
B) $21,100
C) $20,100
D) $20,000

ANSWER

Answer: D
Explanation: D) 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: $1,100 + $9,600 + $4,300 + $5,000 = $20,000. Dividends and interest paid are considered financing costs and are paid later in quarterly or semiannual payments.