Certified Supply Chain Professional (CSCP) Practice Exam

Which of the following is not a direct component of production cost?

1. Direct materials

2. Labor

3. Overhead

4. Sales and marketing expenses

The correct answer is: Sales and marketing expenses

Sales and marketing expenses are not considered a direct component of production cost because they are associated with selling the product rather than producing it. Production costs typically consist of direct materials, direct labor, and manufacturing overhead. Direct materials refer to the raw materials that are used to create a product, which directly contribute to the production process. Labor encompasses the costs associated with workers who are involved in the manufacturing of the product, reflecting their contribution to the output. Overhead includes indirect costs related to production, such as utilities, rent for the production facility, and maintenance costs for equipment, which are necessary for the production process but cannot be directly traced to specific units of output. In contrast, sales and marketing expenses are related to promoting and selling the product once it has been produced and are classified as period expenses rather than production costs. They play a crucial role in ensuring the product reaches the market and is sold, but they do not contribute directly to the creation of the product itself.