Cost elements in a manufacturing business

Function

Cost Element

Example

Manufacturing

Direct material

Raw materials, purchased spares

Direct labour

Productive labour

Direct manufacturing overheads

Indirect labour, factory requirements, loose tools, inspection, supervision, maintenance, tool room labour, water, electricity, machinery depreciation, materials handling, factory engineers, etc.

Sales

Selling expenses

Commission, advertising, delivery, sales orders, salaries for marketing personnel, etc.

Administration

General and administrative expenses

Management and office salaries, office requirements, depreciation on office equipment, telephone, bank charges, stationery, etc.

Financial expenses

Interest

Income tax