Which of the following is a cost of production? Select two that apply.
(1 point)
Responses
improving processes
improving processes
buying raw materials
buying raw materials
spending time working
spending time working
paying property taxes
paying property taxes
choosing the best products
The costs of production refer to the total expenses incurred by a company in the process of creating a product or service. Among the options provided, the following two can be considered direct costs of production:
- buying raw materials
- paying property taxes
"Buying raw materials" is considered a variable cost, which changes with the level of output. These are the essential components that go into the final product.
"Paying property taxes" can be considered a fixed cost as it is required to run the production facility and does not vary with the output (although one might argue it's more of an overhead cost, it still contributes to the overall cost of maintaining the production capabilities).
"Improving processes" and "choosing the best products" are more aligned with long-term strategic management decisions and don't represent direct production costs per se. They could lead to capital expenditures which affect costs but aren't direct production costs.
"Spending time working" does signify a cost in economic terms (opportunity cost), but when considering production costs, we typically quantify this in terms of wages or labor costs, not the mere passage of time. So, if "spending time working" refers to labor costs, then it could indeed be seen as a cost of production. But without that context, it's not as clear-cut as the other options provided.