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ELEMENTS OF COST
Page 2


ELEMENTS OF COST
ELEMENT OF 
COST
MATERIAL
DIRECT 
MATERIAL
INDIRECT 
MATERIAL
LABOUR
DIRECT 
LABOUR
INDIRECT 
LABOUR
EXPENSE
DIRECT 
EXPENSE
INDIRECT 
ENPENSE
Page 3


ELEMENTS OF COST
ELEMENT OF 
COST
MATERIAL
DIRECT 
MATERIAL
INDIRECT 
MATERIAL
LABOUR
DIRECT 
LABOUR
INDIRECT 
LABOUR
EXPENSE
DIRECT 
EXPENSE
INDIRECT 
ENPENSE
DIRECT
MATERIAL
DIRECT 
LABOUR
DIRECT 
EXPENSE
PRIME 
COST
INDIRECT
MATERIAL
INDIRECT 
LABOUR
INDIRECT 
EXPENSE
OVERHEADS
Page 4


ELEMENTS OF COST
ELEMENT OF 
COST
MATERIAL
DIRECT 
MATERIAL
INDIRECT 
MATERIAL
LABOUR
DIRECT 
LABOUR
INDIRECT 
LABOUR
EXPENSE
DIRECT 
EXPENSE
INDIRECT 
ENPENSE
DIRECT
MATERIAL
DIRECT 
LABOUR
DIRECT 
EXPENSE
PRIME 
COST
INDIRECT
MATERIAL
INDIRECT 
LABOUR
INDIRECT 
EXPENSE
OVERHEADS
FACTORY 
OVERHEADS
OFFICE AND 
ADMINISTATION 
OVERHEAD
SELLING AND 
DISTRIBUTION 
OVERHEADS
OVERHEADS
Page 5


ELEMENTS OF COST
ELEMENT OF 
COST
MATERIAL
DIRECT 
MATERIAL
INDIRECT 
MATERIAL
LABOUR
DIRECT 
LABOUR
INDIRECT 
LABOUR
EXPENSE
DIRECT 
EXPENSE
INDIRECT 
ENPENSE
DIRECT
MATERIAL
DIRECT 
LABOUR
DIRECT 
EXPENSE
PRIME 
COST
INDIRECT
MATERIAL
INDIRECT 
LABOUR
INDIRECT 
EXPENSE
OVERHEADS
FACTORY 
OVERHEADS
OFFICE AND 
ADMINISTATION 
OVERHEAD
SELLING AND 
DISTRIBUTION 
OVERHEADS
OVERHEADS
A. DIRECT MATERIAL- Direct material cost is “The cost of materials entering 
into and becoming constituent elements of a product or saleable service”. 
Thus, materials which can be identified with units of output or service are 
known as direct materials.
1.MATERIAL- The material cost is the cost of 
commodities supplied to an undertaking.
B. INDIRECT MATERIAL- “Materials used for the product other than the direct 
materials are called indirect materials. In other words, materials cost which 
cannot be identified with a specific product, job, process is known as indirect 
material cost.
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