The Elements of Cost are the three types of product costs (a) Materials (b) Labour and (c) Overhead. Materials Materials costs are the tangible goods used in producing the product. These costs can be direct or indirect. Direct materials are the quantifiable and traceable costs of materials used in production. Indirect materials either cannot be traced to products or it is not cost effective to do so. For example, a company producing artisan crafts may consider wood to be a direct material, as the company can easily quantify how much wood goes into each craft. However, glue and other fasteners may not be cost effective to track in this manner. In that case, these items would be considered indirect materials. Labour: Wages and salaries paid to employees involved in manufacturing are known as labour costs. These costs can be broken down into direct and indirect labour. Direct labour costs include the wages that are paid to employees that physically handle the product. For this reason, direct labour is also referred to as touch labour. Indirect labour costs are any other wages and salaries related to production, but are not traceable back to units of product. For example, wages for materials handlers and line workers are usually considered to be direct labour costs. However, factory maintenance workers, plant supervisors and quality control engineers would be considered indirect labour. Overhead: Overhead costs are related to production, but are not classified as direct labour or direct materials. This includes all indirect labour and materials costs, as well as any other untraceable costs. Common overhead costs include depreciation on factory equipment, manufacturing rents, supplies costs, insurance costs and licensing fees. Follow @galli_baba @galli_baba1 for more daily updates and Weekly posts #icai #icwai #icsi #castudents #canotes #cmanotes #csnotes #chartedaccountant #costaccounting #companysecretary #costandmanagementaccounting #ca #cma #cs #bcom #mcom #mba #professionalcourse #shortnotes #accountancy #gallibaba #costing https://www.instagram.com/p/BvfFysgAx5k/?utm_source=ig_tumblr_share&igshid=djgvtpsrb9ji
