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Office and administrative expenses can be charged on the basis of .a.labour cost.b.factory cost.c.material cost.d.prime cost

Question

Office and administrative expenses can be charged on the basis of:

  • a. labour cost
  • b. factory cost
  • c. material cost
  • d. prime cost
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Solution

Office and administrative expenses can be charged on the basis of several factors. Here's a breakdown of each option:

a. Labour cost: This refers to the cost of employees' work that is directly related to the production of goods or services. Office and administrative expenses can be allocated based on labour cost, especially if these expenses are directly related to the management of employees or the work they do.

b. Factory cost: This is the total cost incurred on the production floor to manufacture goods. It includes direct materials, direct labor, and manufacturing overhead. Office and administrative expenses can be allocated based on factory cost if these expenses are directly related to the production process.

c. Material cost: This refers to the cost of the raw materials used in the production of goods. Office and administrative expenses can be allocated based on material cost if these expenses are directly related to the procurement, storage, or management of these materials.

d. Prime cost: This is the total cost of direct materials and direct labor used in the production of goods. Office and administrative expenses can be allocated based on prime cost if these expenses are directly related to the direct production activities.

In conclusion, the basis for charging office and administrative expenses depends on the nature of these expenses and their relationship to the production process.

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