Southwest Distribution Inc. estimates the following expenditures: interest paid of $17,500; wages paid to workers of $74,600;
overhead costs of $12,300; raw materials of $55,000; shipping costs of $7,100 and dividends paid to common stockholders of $15,000. What are the total production costs?
A) $141,900
B) $149,000
C) $166,500
D) $181,500
Answer: B
Explanation: B) Production costs include, among other items, the wages paid to workers, the raw materials for manufacturing products, the overhead (such as electricity, water, plant space, and so on), and the shipping costs that get the product to the customer. Thus, the total production costs are: $74,600 + $12,300 + $55,000 + $7,100 = $149,000. Preferred dividends are considered a financing cost that is often paid in quarterly payments.
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