In a manufacturing organization, which of the following expenses does not elate to cost of production?
Answer Details
The expense that does not relate to the cost of production in a manufacturing organization is the administration overhead.
Cost of production is the total cost incurred in manufacturing a product or providing a service. It includes the cost of materials consumed, direct labor, and direct overhead. Work-in-progress is also part of the cost of production because it represents the value of partially completed goods.
However, administration overhead is not directly related to the manufacturing process. It refers to the expenses incurred in running the administrative functions of the organization, such as salaries of executives, accounting staff, legal fees, and other general expenses not directly tied to production. These expenses are necessary to keep the business running but do not contribute to the actual production of goods or services.
Therefore, administration overhead is not included in the cost of production because it is not directly related to the manufacturing process.