The term that includes the raw materials, direct labor, and factory overhead as part of production costs is:

• A. Auditing
• B. Cost of Production
• C. Cost Accounting
• D. Accounting Education

Answer: (B)

Raw materials, direct labor, and factory overhead are the elements that make up production costs—the expenses incurred to turn inputs into finished goods. The term that covers all of these components is cost of production.

Auditing is about examining financial records to verify accuracy, not the group of items used to manufacture goods. Cost accounting is the broader system of tracking, analyzing, and reporting costs, while cost of production specifically refers to the combined production costs. Accounting education is simply the field of study and not a term for production costs.

Example: making chairs would include wood and other materials as raw materials, wages of workers as direct labor, and utilities or depreciation of the factory as overhead; all these together constitute the cost of production.