Cost elements in a manufacturing business

The most important cost elements are summarised under the following headings:  Function, Cost-elements and examples:

 Example: Cost elements in a Manufacturing Concern

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

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