COST ANALYSIS

&
ELEMENTS OF COST
 Classification Of Cost
According to……..
1. Nature
2. Function
3. Identifiably
4. Behavior
5. Association With Products
6. Controllability
7. Normality
8. Time
9. Relevance
10.Other Costs
 Classification Of Cost

1. According To Nature Or Elements

Materials Labour
Expenses
Cost Cost
MATERIAL COST
 DIRECT MATERIAL COST

IT IS A COST OF MATERIALS
WHICH
ENTER
INTO & FORM PART OF PRODUCT

e.g. - timberin furniture – making

- clay in brick making
INDIRECT MATERIAL COST

 IT IS THE COST OF MATERIAL WHICH DO NOT

FORM THE PART OF PRODUCT
BUT WHICH HELP THE PRODUCTION
 e.g
 LUBRICATING OIL , FUEL etc.

 Small items like thread, gum , nails etc

Though forms part of product but difficult to calculate cost

per unit of that material
----so consider as direct material
LABOUR COST
 LABOUR COST
“The labour cost is the cost of remuneration of the
employees of an undertaking.” such as
Wages, salaries, commissions, bonus, etc.

There are two types of labour cost are

1. Direct Labour cost

2. Indirect Labour cost

EXPENSE COST
EXPENSES COST
 “The cost of services provided to an undertaking
and the notional cost of the use of owned assets.”

Expenses are two types

1. Direct Expenses
2. Indirect Expenses
OVERHEADS
OVERHEADS

“The aggregate of Indirect material cost, Indirect

wages and Indirect expenses”

Three types such as

1. Indirect material cost

2. Indirect labour cost

3. Indirect expenses
INDIRECT EXPENSES OVERHEADS

1. Factory overheads
2. Office & administration overheads
3. Selling & distribution overheads
 ELEMENTS OF COST

Prime cost Overheads

Direct Direct Direct

Material labour expenses
Indirect Indirect Indirect
Material Labour Expenses

Factory Office & Selling & distribution

Overheads administration overheads
o overheads