Question

Total cost is also known as

• A. Cost of manufacturing
• B. Factory cost
• C. Cost of sales
• D. Cost of production

Hint:

$$\text{Cost of Sales} + \text{Profit Margin} = \text{Selling Price}$$ Understanding this sequential relationship is the foundation of preparing any analytical cost sheet.

Answer 1

The Correct Option is C

Step 1: Analyzing the Components of Cost Sheet:
A cost sheet accumulates expenses in a progressive, structured sequence: Direct Materials + Direct Labor + Direct Expenses &= Prime Cost
Prime Cost + Factory Overheads &= Factory Cost (or Works Cost)
Factory Cost + Administration Overheads &= Cost of Production
Cost of Production + Selling & Distribution Overheads &= Total Cost (or Cost of Sales)

Step 2: Differentiating Total Cost from Other Terms:

• Cost of Manufacturing/Factory Cost: Represents only the production expenses incurred up to the factory gate.
• Cost of Production: Represents the aggregate of factory costs and corporate administrative overheads, excluding sales costs.
• Cost of Sales: Represents the absolute total sum of all manufacturing, administrative, and selling costs incurred to place the product in the customer's hands.

Step 3: Conclusion:
Therefore, the ultimate aggregate value representing the entire cost incurred in making and distributing a product is the “Total Cost”, which is synonymously designated as the “Cost of Sales” (C).