Cost of Production
Expenses incurred making products: materials, direct labor, manufacturing overhead.
Formula
Cost of Production = Direct Materials + Direct Labour + Manufacturing Overhead
Real World
Tesla's cost of production per vehicle includes steel and battery materials, assembly-line worker wages at its Gigafactories, and the overhead costs of running those enormous plants.
Exam Focus
List all three components (materials, labour, overhead) when asked to define cost of production — omitting overhead is the most common mark-losing error.
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