ELEMENTS OF COST
Two Types: Direct costs and indirect costs
Direct Material
raw materials,Semi-finished materials or components which become part ad parcel of the product are known as direct material.
E.g clay in bricks
wood in furniture
leather in shoe
cotton in yarn etc.
However if a material forms part of the product but is of a negligible value, it may be treated as indirect material.
E.g yarn used in making shoes
nails used in furniture making etc.
Direct Labour
labour which can be conveniently identified with and directly charged to a particular product, job, service etc. it is all labour which is expended in converting raw materials into finished products.
E.g
wages paid to labour engaged in the actual production or carrying out an operation or process or a contract.
also called direct wages, productive labour, operating labour, prime cost labour etc.
Direct Expenses
All expenses other than direct material and direct labour which can be conveniently identified with or directly chargeable to a product, job, process or service are called direct expenses. Also called chargeable expenses, prime cost expenses and productive expenses.
E.g
Cost of special patterns, designs, drawings and tools made or purchased for specific product or process, excise duty, royalty, architects feesm and hore charges of special tools and equipment used for a particular product, job or service.
Indirect Material
Material which cannot be traced in and which does not form part of the finished product. it cannot be directly charged to a particular cost centre, product, job, contract process etc.
E.g
consumable stores
lubricants
cotton waste
grease oils
chemicals added in process etc.
Indirect Labour
Cost of labour which cannot be identified with or directly charged to a product, job, process or service etc. and which is general in nature is called indirect labour. it represents cost of labour expended on auxiliary work in connection with the product manufactured. it aids and facilitated production work indirectly.
E.g wages paid to maintenance workers employed in workshops,
mechanics, cleaners, store-keepers, watch and ward and clerical staff etc.
Indirect Expenses
Expenses which cannot be directly charged to production and which are other than indirect and indirect material are called indirect expenses.
E.g
Rent
rates
insurance
taxes
power,lighting
heating, repairs , canteen expenses, hospital and dispensary expenses
office and administrative expenses, etc.
Two Types: Direct costs and indirect costs
Direct Material
raw materials,Semi-finished materials or components which become part ad parcel of the product are known as direct material.
E.g clay in bricks
wood in furniture
leather in shoe
cotton in yarn etc.
However if a material forms part of the product but is of a negligible value, it may be treated as indirect material.
E.g yarn used in making shoes
nails used in furniture making etc.
Direct Labour
labour which can be conveniently identified with and directly charged to a particular product, job, service etc. it is all labour which is expended in converting raw materials into finished products.
E.g
wages paid to labour engaged in the actual production or carrying out an operation or process or a contract.
also called direct wages, productive labour, operating labour, prime cost labour etc.
Direct Expenses
All expenses other than direct material and direct labour which can be conveniently identified with or directly chargeable to a product, job, process or service are called direct expenses. Also called chargeable expenses, prime cost expenses and productive expenses.
E.g
Cost of special patterns, designs, drawings and tools made or purchased for specific product or process, excise duty, royalty, architects feesm and hore charges of special tools and equipment used for a particular product, job or service.
Indirect Material
Material which cannot be traced in and which does not form part of the finished product. it cannot be directly charged to a particular cost centre, product, job, contract process etc.
E.g
consumable stores
lubricants
cotton waste
grease oils
chemicals added in process etc.
Indirect Labour
Cost of labour which cannot be identified with or directly charged to a product, job, process or service etc. and which is general in nature is called indirect labour. it represents cost of labour expended on auxiliary work in connection with the product manufactured. it aids and facilitated production work indirectly.
E.g wages paid to maintenance workers employed in workshops,
mechanics, cleaners, store-keepers, watch and ward and clerical staff etc.
Indirect Expenses
Expenses which cannot be directly charged to production and which are other than indirect and indirect material are called indirect expenses.
E.g
Rent
rates
insurance
taxes
power,lighting
heating, repairs , canteen expenses, hospital and dispensary expenses
office and administrative expenses, etc.
No comments:
Post a Comment