The Element of Cost or Part or Components of Cost

Cost
is made up of so many elements or component, they are

1.)   Materials
2.)   Labour
3.)   Overheads
1.)   Materials: Materials can also be sub-divided
into directed and indirect materials
v Direct Materials: There are
materials that are traceable to a unit of production. These are items that are
seen, that could be felts or items that could be touch. E.g. fan.
v Indirect Material: These are
materials that are not traceable to a unit of production but they assist in the
production of goods and services. E.g. broom, cleaning rags, e.t.c.
2.)   Labour: It can also be sub-divided into
direct and indirect labour.
v Direct Labour: This is the cost of labour
that is traceable to a unit of production. E.g. wages or salaries payable to a
machine operator.
v Indirect Labour: This is
the cost of labour that is not traceable to a unit of production. E.g.
supervisor’s salary or wages.
3.)  Overhead: This is the aggregate of
indirect material, indirect labour and other associated cost which are not
traceable to a unit of production. E.g. electricity, depreciation on factory
equipment and repairs and maintenance of equipment.

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