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Steuben Company produces dog houses. During the current year, Steuben Company incurred the following costs:

Rent on manufacturing facility $250,000
Office manager's salary 150,000
Wages of factory machine operators 110,000
Depreciation on manufacturing equipment 50,000
Insurance and taxes on selling and administrative offices 30,000
Direct materials purchased and used 170,000

Based on the above information, what would be treated as a product cost?

Sagot :

The amount that would be treated as a product cost is $580,000.

What is a Product Cost?

A product cost is a direct cost that is directly incurred in the production of a good such as direct materials, direct labor, and manufacturing overhead.

Therefore, from the information in the question, the product cost can be calculated as follows:

Product cost = Rent on manufacturing facility + Wages of factory machine operators + Depreciation on manufacturing equipment + Direct materials purchased and used …………… (1)

Substituting the relevant values into equation (1), we have:

Product cost = $250,000 + $110,000 + $50,000 + $170,000

Product cost = $580,000

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