What is the effect of depreciation on the cost sheet?

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Question: What is the effect of depreciation on the cost sheet?

Options:

Correct Answer: Increases manufacturing overhead

Solution:

Depreciation is included in manufacturing overhead, thus increasing the total cost reflected in the cost sheet.

What is the effect of depreciation on the cost sheet?

What is the effect of depreciation on the cost sheet?

Step 1: Understand what depreciation is. It is the reduction in value of an asset over time.
Step 2: Know that depreciation is considered a cost of using that asset in production.
Step 3: Realize that manufacturing overhead includes all costs related to production that are not direct materials or direct labor.
Step 4: Recognize that since depreciation is part of manufacturing overhead, it gets added to the total costs of production.
Step 5: Conclude that when depreciation is included, it increases the total cost shown on the cost sheet.

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