Elements of costs are as follows:
- Material Cost: Cost of material and commodities
Direct Materials: Direct materials are those which an be identified with individual cost centers and which becomes an integral part of finished products. Example: timber used for furniture, bricks and tiles for building
Indirect Materials: Cannot be identified with indicidual cost centers, not integral part of the finished product.
Example: Lubricants, cleaning materials, etc. - Labour Cost: Salaries, wages, etc.
Direct Labour cost: Costs for those who are directly engaged in manufacturing process
Indirect Labour cost: Costs for those who are NOT directly engaged in manufacturing process - Expenses: Cost of services provided to the organisation
Direct Expenses: Can be identified with a particular job or individual cost center. Example: payment for designing, hiring a machine for a special job
Indirect Expenses: Not for a particular job. Example: Rent of building, telephone bill - Prime Cost: Aggregate of all direct costs
- Overheads: Aggregate of all indirect costs – Manufacturing overheads, office and administration overheads, selling & distribution overheads.
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