Elements of Product Costing
Direct material cost
These cost include cost of material /raw material required for production of finished product
These raw material makes integral part of the finished product
Direct Labor cost
The physical and mental effort to convert raw material into finished
product are defined as direct labor cost .Can be easily identified with a specific physical
product .
Factory Overhead
All other expenses which helps in running production of a manufacturing units are clubbed into
factory overhead for examples
Indirect material cost
Its the material cost which cannot be assigned directly to a specific product of production . For
examples cost of fuel , waste , chemicals for waste water treatment
Indirect labor cost
It cannot be linked to a specific product . It includes wages for store keepers , time keepers ,
managerial staff , sales personnel etc
Indirect expenses - There are many other costs which cannot be clubbed to any particular cost
centres or cost units . These are further classified into
I a.Indirect manufacturing expenses
Cost like depreciation of machinery , insurance cost , rent or lease cost for factory , electricity
cost , quality charges ISO etc
b.Office and Administrative expenses
Admin cost are service contract for office machines , stationery , telephone , fax , Internet
,office rent , office lighting , legal , audit charges
c.Selling and Distributive expenses
Cost related to sales and promotion of products also includes dispatching , transportation
charges . Advertisement and sales travelling charges / calls made on customer service .
Documentation charges . Warehouse rent charges .
More on Manufacturing Costing
Product Costing
Material Cost
Labor Cost
Factory Overhead Cost
Product Costing
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