Elements of Cost of a product are:
Answers
Answer:
•The total cost of a product includes the following five elements:
1)Direct Material: Direct materials refers to the cost of the materials which becomes a major part of the finished product. ...
2)Direct Labour: ...
3)Direct Expenses: ...
4)Factory Overhead: ...
5)Selling and Distribution and Administrative Overheads:
I HOPE IT CAN HELP YOU SO PLEASE ❤️ MARK AS BRAIN LIST
Answer:
A cost is composed of three elements – Material, Labour and Expenses. Each of these three elements can be direct and indirect, i.e., direct materials and indirect materials, direct labour and indirect labour, direct expenses and indirect expenses.
Explanation:
1. Direct Material
It represents the raw material or goods necessary to produce or manufacture a product. The cost of direct material varies according to the level of output. For example, Milk is the direct material of ghee.
2. Indirect Material
It refers to the material which we require to produce a product but is not directly identifiable. It does not form a part of a finished product. For example, the use of nails to make a table. The cost of indirect material does not vary in the direct proportion of product.
Learn more about Meaning of Cost, Costing and Cost Accounting here in detail
3. Direct Labour
It refers to the amount which paid to the workers who are directly engaged in the production of goods. It varies directly with the level of output.
4. Indirect Labour
It represents the amount paid to workers who are indirectly engaged in the production of goods. It does not vary directly with the level of output.
5. Direct Expenses
It refers to the expenses that are specifically incurred by the enterprises to produce a product. The production cannot take place without incurring these expenses. It varies directly with the level of production.
6. Indirect Expenses
It represents the expenses that are incurred by the organization to produce a product. These expenses cannot be easily identified accurately. For example, Power expenses for the production of pens.
7. Overhead
It refers to all indirect materials, indirect labour, or and indirect expenses.
8. Factory Overhead
Factory overhead or Production Overhead or Works Overhead refers to the expenses which a firm incurs in the production area or within factory premises.
Indirect material, rent, rates and taxes of factory, canteen expenses etc.are example of factory overhead.
9. Administration Overhead
Administrative or Office Overhead refers to the expenses which are incurred in connection with the general administration of the organizations.
Salary of administrative staff, postage, telegram and telephone, stationery etc.are examples of administration overhead.
10. Selling Overhead
All expenses that a firm incurs in connection with sales are selling overheads. Salary of sales department staff, travelers’ commission, advertisement etc.are example of selling overhead.
11. Distribution Overhead
It represents all expenses incurred in connection with the delivery or distribution of finished goods and services from the manufacturer to the consumer. F Delivery van expenses. loading and unloading, customs duty, the salary of deliverymen are examples of distribution overhead.