COST ITEMS
NO.
COST ITEMS
1
Direct material
2
Direct labor
Advertising Expense
3
Fixed Cost
4
5
Controllable costs
6
Manufacturing
overhead
7
Operating costs
DEFINITION
EXAMPLES
Direct material costs
are the costs of raw
materials or parts that
go directly into
producing products
Direct labor costs are
the wages, benefits,
and insurance that are
paid to employees who
are directly involved in
manufacturing and
producing the goods
refers to cost incurred
in promoting a
business
an example of a direct
material cost would be
the plastic used to make
the toys.
The cost that does not
change with an
increase or decrease in
the amount of goods
or services produced or
sold
are expenses managers
have control over and
have the power to
increase or decrease.
Example of fixed cost is
rental lease payments
A costs are applied to
units of production
based on a variety of
possible allocation
systems, such as by
direct labor hours or
machine hours
incurred.
Are the ongoing
expenses incurred
from the normal dayto-day of running a
business that include
both overhead and
costs of goods sold.
Examples are the
Salaries and wages for
quality assurance,
industrial engineering,
materials handling and
factory management.
For example, workers on
the assembly line or
those who use the
machinery to make the
products.
Examples are flyers,
brochure, social media,
television and
newspaper.
Examples of controllable
costs are office supplies,
advertising expenses
and employee bonuses
Examples of this is Rent
and utilities, wage and
salaries, and overhead
costs such as selling,
general, &
administrative expenses.
COST ITEMS
8
Product Cost
9
Rent expense
10
Consumable materials
11
Sundry selling
expenses
Selling Expenses
12
13
General Expenses
14
Factory supplies
refer to
the costs incurred by a
business from
manufacturing
a product or providing
a service
labor, raw materials,
consumable
manufacturing supplies,
and general overhead
Rent is money paid for
the use of a property
or home belonging to
someone else.
Consumables are
products that
consumers use
recurrently, i.e., items
which "get used up" or
discarded
An example of rent is
what you pay to your
landlord to live in your
apartment.
For example
consumable office
supplies are such
products as paper, pens,
file folders, Post-it
notes, and toner or ink
cartridges.
Example: BL
International is into the
business of shoe
manufacturing
Sundry expenses are
items or expenditures
that are rare, amount
to very little, or are
relatively unimportant
and therefore do not
fit into a standard asset
or expense category
Selling expenses are
the costs associated
with distributing,
marketing and selling a
product or service.
Examples include
advertising costs,
salaries and commission
of sales personnel,
storage costs, shipping
and delivery, and
customer service.
General expenses are
Examples are: executive
the costs a business
salaries, salaries of
incurs as part of its
administrative staff,
daily operations,
accounting expenses,
separate from selling
legal expenses, research
and administration
and development, and
expenses.
other costs related to
general administration
of the organization.
Factory supplies may
These supplies include
also be included in an
maintenance materials,
overhead cost pool and janitorial supplies, and
allocated to units
items that are
produced.
considered incidental to
the production process.
COST ITEMS
15
Office supplies
Janitorial supplies
16
17
Freight-out (delivery
expense)
Freight-in
18
19
Utilities expense
20
Indirect labor
21
Administrative
Expenses
They are typically of
such low cost that they
are charged to expense
as incurred.
are products and
equipment you need in
order to successfully
clean and keep clean
an area or place
Freight out is the
transportation cost
associated with the
delivery of goods from
a supplier to its
customers.
is the cost of having
goods or materials
delivered to a business
for manufacture or
resale.
Utilities expense is the
cost consumed in a
reporting period
related to the following
types of expenditures:
is a category of indirect
cost and refers to
those employees that
assist the direct labor
in the performance of
their work.
are expenses an
organization incurs
that are not directly
tied to a specific
function such as
manufacturing,
production or sales.
These supplies include
such items as paper,
toner cartridges, and
writing instruments.
Janitorial supplies are
those items used to
clean such as brooms,
vacuums, mops,
buckets, gloves, wipers,
trash bags and trash
cans along with other
equipment, tools, and
chemical products.
only incurs this cost
when it sells goods to a
customer
When the buyer pays for
the cost of freight, the
buyer records the cost
as freight-in.
Examples of this is the ;
Electricity
Heat (gas)
Sewer
Water
An example would be
security guards,
supervisors, and quality
assurance workers in
the factory. Their wages
and benefits would be
classified as indirect
labor costs.
Examples of this is the
salaries and wages cost
of employees engaged
in finance, accounts,
human resources,
information technology
division, etc.
COST ITEMS
22
23
Prepaid Expenses
Raw Materials
24
Repairs and
maintenance
25
26
27
Period Costs
Depreciation
Insurance
is a type of asset on
the balance sheet that
results from a business
making advanced
payments for goods or
services to be received
in the future.
the basic material from
which a product is
made.
are expenses a
business incurs to
restore an asset to a
previous operating
condition or to keep an
asset in its current
operating condition.
Costs that are not
incurred to
manufacture a product
and, therefore, cannot
be assigned to the
product
is an accounting
method of allocating
the cost of a tangible
or physical asset over
its useful life or life
expectancy
is a means of
protection from
financial loss. It is a
form of risk
management, primarily
used to hedge against
the risk of a contingent
or uncertain loss.
An example of a prepaid
expense is insurance
Examples of raw
materials include: steel,
oil, corn, grain, gasoline,
lumber, forest
resources, plastic,
natural gas, coal, and
minerals.
This are the examples of
the repair and
maintenance ; painting.
fixing: an existing AC
unit. a faucet or toilet.
replacing: a few shingles
on a roof. a cabinet
door.
Examples of this is the
Marketing costs, sales
costs, audit fees, rent on
the office building and
so on.
If a company buys a
piece of equipment for
$50,000, it could
expense the entire cost
of the asset in year one
or write the value of the
asset off over the asset's
10-year useful life
when you save money in
case you lose your job
and are out of work, this
is an example of
insurance in case you
lose your job.
COST ITEMS
28
29
30
31
32
Interest Expense
Property Taxes
Salaries
Legal Expenses
Interest expense is a
non-operating expense
shown on the income
statement.
Property tax is a tax on
property -- usually real
estate -- as determined
by an assessor.
A salary is a form of
payment from an
employer to an
employee, which may
be specified in an
employment contract.
means the fees, costs
and expenses of any
kind incurred by any
Person indemnified
herein and its counsel
in investigating,
preparing for,
defending against or
providing evidence,
producing documents
or taking other action
with respect to any
threatened or asserted
Claim.
For example, a business
borrows $1000 on
September 1 and
the interest rate is 4
percent per month on
the loan balance.
For example, if the
property tax rate is 4%
and your house's
assessed value is
$200,000, then your
property tax liability
equals (.04 x $200,000)
or $8,000. The assessed
value is often computed
by incorporating the
purchases and sales of
similar properties in
nearby areas.
An example of salary is
the fixed salary of
$100,000 a year paid to
a doctor.
Examples: attorney fees,
court costs, and
litigation expenses, if
any, including, but not
limited to, expert
witness fees and court
reporter fees.
COST ITEMS
33
34
35
36
37
38
40
41
42
43
COST ITEMS
44
45
46
47
48
49
50