Elements of Cost

Raw materials are converted into finished products by a manufacturing concern with the help of labor, plants etc. The elements that constitute the cost of manufacturing are known as elements of cost. The elements of cost include the following:

  • Material
  • Labor
  • Expenses

Each of these elements is again subdivided into direct and indirect material.

Direct material, direct labor and direct expenses are those which can be traced in relationship with a particular process, job, operation or product. Indirect material, indirect labor and indirect expenses are those which are of general nature and cannot be traced in relationship with a particular process, operation, job or product.

In this guide on Elements of Cost and Preparation of Cost Sheet (PDF), you will understand about the elements of Cost, Classify overheads on different basis and prepare a cost sheet.

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