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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