Elements of cost:
1. Material: the substance from which the product is made is known as material it may be in a raw or a manufactured state. It can be direct as well as indirect.
Direct material: all material which becomes an integral part of the finished product and which can be conveniently assigned to specific physical units is termed as direct material. Following are some of the examples of the direct material.
a. All material or components specifying purchased produced or requisitioned from stores.
b. Primary packing material (for example, carton, wrapping, cardboard boxes etc. )
c. Purchase or partly produced components.
d. Direct material is also described as process material, prime cost material, production material, stores material, etc.
2. Indirect material: All material which is used for purpose ancillary to the business and which can't be conveniently assigned to specific physical units of termed as indirect material. Consumable stores, oil and waste, printing and stationary material etc, are a few examples of the indirect material.
Labour: for conversion of materials into finished goods, human effort is needed, such human effort is called labour, and labour can be direct as well as indirect