Prime Cost
The direct expenses such as the direct material, direct labor and direct expenses.
Direct Material/ raw material: The cost of materials which can be directly and conveniently identifiable to each unit of product. A tangible commodity is almost impossible without the raw material. Crude Materials, components or parts, WIP inventory, primary packing
NOT: includes freight-in, import duties, or cost of receiving, cost of storing
Direct labor
Direct labor costs can be directly traced to each unit of product without any apportionment basis. Direct labor is, therefore, defined as the employment of the workers who are physically engaged in the production of the output. The labors that are paid with each piece of marginal product are direct labors.
Example of direct labor costs include the wages of operatives who assemble part into finished products such as the sewing labor in a garment factory that is paid per piece or time spent to make shirts, paints and trousers.
Direct expenses
Expenses which incurred directly on a particular product. It can be directly identified with each units of a product. Cost of product design, product model, patent cost, royalties.
Overhead costs/indirect cots
The cost which are not directly adhered to any particular department product or units. Indirect cost is the common cost eg. salary of the manager,
Indirect materials
Cannot be identified with any one product.
Indirect labour
Indirect expenses
Cannot be conveniently traced to each unit of product.
0 Comments