Non-production cost
Non-production costs relate to functions outside producing goods, including selling, distribution, general administration and finance. They are usually treated as period costs in production-cost profit statements rather than included in manufactured inventory. For internal pricing or customer-profitability analysis, a business may additionally attribute them to cost objects, provided the purpose and basis are clear. Their function does not determine their behaviour: distribution cost may be fixed or variable.
Worked example
A salesperson receives $2 commission per unit sold, while office administration costs $4,000 per month. Both are non-production costs despite their different behaviour.
Common mistake
A full internal cost for pricing can include attributed selling costs; that does not automatically make them part of production inventory.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
