Cost Accounting

Relationship 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 Overhead

Factory overhead are 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:

  • Direct labour costs - e.g. manufacturing workers' wages

  • Raw materials

  • Shipping and distribution costs

 

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.

Test Your Knowledge! 
Manufacturing Costs Quiz

Answer each of the following costs as a 'Direct Material', 'Direct Labour' or 'Factory Overhead'.

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