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Fixed Cost: It remains constant irrespective of the output up to capacity limit. Variable Cost: This cost varies according to the output.
Semi- Variable Cost: It remains constant up to a certain level and registers change afterwards.
Direct Material: It is the cost of raw material used for manufacturing a product. Direct Labour or Direct Wages: It is the amount paid to workers who are engaged in the
manufacturing line.
Selling Expenses: It includes all expenses, incurred in connection with sales of finished
product and services.(Eg: Advertisement, Show room expenses, After sales service expenses
etc.)
Distribution Expenses: It include all expense, incurred in connection with making the goods
available to customers. (Eg: Packing charges, Loading charges, Carriages on sales etc.)
For determination of total cost of production, a statement showing the various elements of cost is prepared.
It gives the break up of total cost under different elements. It shows total cost as well as cost per unit. It helps in comparison with previous years. It facilities preparation of tenders or quotations. It enables the management to fix up selling price.
It controls cost.
is also known as flat cost. Prime cost = Direct Materials + Direct Labour + Direct Expenses Prime cost = Direct Materials + Direct Labour + Direct Expenses
Prime Cost: It comprises of all direct materials, direct labour and direct expenses. It
Total Cost: It represents cost of production plus selling and distribution expenses.
Total Cost= Cost of Production + Selling & Distribution Expenses
Selling Price: It is the price which includes total cost plus/ minus of profit or loss.
Selling Price = Total Cost + Profit (-Loss)