Cost Accounting

Relationship Costs

Indirect Costs

Indirect Cost
Indirect costs are costs that are used in a manufacturing process or service but cannot be easily traceable to the end product or service.

Some indirect costs can include:
- Glue
- Paint
- Maintenance and repairs
- Supervisor's salary/wages
- Manager's salary/wages
- Utility costs
- ICT costs

Factory Overheads
Factory overhead are a type of indirect cost that includes all the costs of indirect labour and indirect mateirals used in the manufacture of a product.

Factory overhead = Indirect Materials + Indirect Labour

Direct Costs

Direct costs are costs that are used in a manufacturing process or service and can easily be traceable to the end product or service.

Some direct costs can include either direct materials or direct labour.

Direct Materials:
Direct materials are only materials that are easily traceable to the manufacture of a product. E.g. Wood used in a table.

Direct Labour:
Direct labour is the cost directly associated with the manufacture of a product. E.g. Production line worker's wages.

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