Chapter 2: Breaking Down the Building Blocks: Understanding the Elements of Cost"
Abstract: The three main elements of cost are materials, labor, and expenses . These elements can be further categorized as direct or indirect. Element Description Material The cost of raw materials and other components used in production Labor The cost of wages and salaries for employees involved in production Expenses All other costs, including direct expenses and indirect expenses Direct and indirect costs Direct costs : Costs that can be traced to a specific product or service Indirect costs : Costs that cannot be directly traced to a specific product or service Examples of cost elements Direct materials : Cloth for shirts, paper for books, wood for furniture Indirect materials : Printing ink for stationery, scissors for cutting cloth, nails for shoes or furniture Direct labor : Costs for employees involved in production Indirect labor : Costs for supporting staff Direct expenses :...