What Are The Three Elements Of Product Cost?

What is an example of a cost?

A direct cost includes raw materials, labor, and expense or distribution costs associated with producing a product.

The cost can easily be traced to a product, department, or project.

For example, Ford Motor Company (F) manufactures cars and trucks.

A plant worker spends eight hours building a car..

What is basic cost?

Prime CostPrime cost consists of costs of direct materials, direct labors and direct expenses. It is also known as basic, first or flat cost. … It is also known as works cost, production or manufacturing cost. 3. Office CostOffice cost is the sum of office and administration overheads and factory cost.

What are the elements of cost explain?

A cost is composed of three elements – Material, Labour and Expenses. Each of these three elements can be direct and indirect, i.e., direct materials and indirect materials, direct labour and indirect labour, direct expenses and indirect expenses.

What are the 3 types of cost?

Types of costsFixed costs. Fixed costs are costs that do not vary with the level of output in the short term.Variable costs. A variable cost varies in direct proportion with the level of output. … Semi-variable costs. … Total costs. … Direct costs. … Indirect costs.

What does product cost consist of?

Hub > Accounting. The costs involved in creating a product are called Product Costs. These costs include materials, labor, production supplies and factory overhead. The cost of the labor required to deliver a service to a customer is also considered a product cost.

What are the basic elements of production cost?

The basic elements of production cost are: direct materials, direct labor and factory overhead.

What is product costing method?

Product costing methods are used to assign cost to a manufactured product. The main costing methods available are process costing, job costing and direct costing. Each of these methods apply to different production and decision environments.

What are different types of cost?

Types of CostsFixed Costs (FC) The costs which don’t vary with changing output. … Variable Costs (VC) Costs which depend on the output produced. … Semi-Variable Cost. … Total Costs (TC) = Fixed + Variable Costs.Marginal Costs – Marginal cost is the cost of producing an extra unit.

What are the types of cost control?

Cost Control Techniques1 – Planning the Project Budget. You would need to ideally make a budget at the beginning of the planning session with regard to the project at hand. … 2 – Keeping a Track of Costs. … 3 – Effective Time Management. … 4 – Project Change Control. … 5 – Use of Earned Value.

How will you classify cost?

Classification of Costs. Important classifications of costs include: By nature or traceability: Direct costs and indirect costs. Direct costs are directly attributable/traceable to cost objects, while indirect costs (not being directly attributable) are allocated or apportioned to cost objects.

Which is an element of product cost?

Product costs are costs that are incurred to create a product that is intended for sale to customers. Product costs include direct material (DM), direct labor (DL), and manufacturing overhead (MOH).

What are the 4 types of cost?

Following this summary of the different types of costs are some examples of how costs are used in different business applications.Fixed and Variable Costs.Direct and Indirect Costs. … Product and Period Costs. … Other Types of Costs. … Controllable and Uncontrollable Costs— … Out-of-pocket and Sunk Costs—More items…•