Product Costs

Breakup of Product Costs

The product costs are further classified into:

• Direct materials: Represents the cost of the materials that can be identified directly with the product at reasonable cost. For example, cost of paper in newspaper printing, cost of
• Direct labor: Represents the cost of the labor time spent on that product, for example cost of the time spent by a petroleum engineer on an oil rig, etc.
• Manufacturing overhead: Represents all production costs except those for direct labor and direct materials, for example the cost of an accountant's time in an organization, depreciation on equipment, electricity, fuel, etc.