Sunday, January 17, 2010

Components of Total Cost

Components of Total Cost

1. Prime Cost

Prime cost consists of costs of direct materials, direct labors and direct expenses. It is also known as basic, first or flat cost.

2. Factory Cost

Factory cost comprises prime cost and, in addition, works or factory overheads that include costs of indirect materials, indirect labors and indirect expenses incurred in a factory. It is also known as works cost, production or manufacturing cost.

3. Office Cost

Office cost is the sum of office and administration overheads and factory cost. This is also termed as administration cost or the total cost of production.

4. Total Cost

Selling and distribution overheads are added to the total cost of production to get total cost or the cost of sales.

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