Notesale: Turn your study into money

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THE ELEMENTS OF COST
The elements of cost are those elements that constitute the cost of the manufacture of a
product
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Material cost are two types: direct
material cost and indirect material cost
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The cost of direct material varies according to the level
of output
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The amount of money spent on
direct materials is known as direct material cost
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The cost
associated with indirect materials is called indirect material cost
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In certain cases, some direct materials are used so little that it is not worthwhile to
charge them as direct materials
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Labour cost
It is the cost of salary, wages, bonus, commission of the employees of a company
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Direct labour cost is the cost of labour directly engaged in production operations
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Indirect labour cost is the remuneration paid for labour engaged to help the production
operations
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The
remuneration paid to these persons cannot be traced to a job process or production order
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Similarly,
clerical and managerial staff, salesmen, distribution employees etc, are also included in the
orbit of indirect labour
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It is the expenditure other than labour and material
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Direct expenses are the expenses that can be directly identified with a unit of output, job,
process, or operation
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For example, the cost of special patterns,
design, or plans for a particular job or work order
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These expenses are
incurred commonly for jobs and processes, for example, rent, power, depreciation, bank
charges, advertising etc

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