Cost Accounting - Accounting Notes

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, DEFINITIONS
1. RAW MATERIALS
- Materials that go into the final product

2. DIRECT COSTS (PRIME COSTS)
- Can be directly traced to the product

3. DIRECT MATERIAL COSTS
- Material that goes into the final product. Converted in making of product

4. DIRECT LABOUR COST
- Labour costs of workers directly involved in manufacturing of goods

5. PRIME COSTS
- Raw (Direct) Material Cost + Direct Labour Cost

6. INDIRECT COSTS
- Can’t be directly traced to product. Allocated based on some level of
activity.

7. INDIRECT MATERIAL COST
- Don’t go into finished product but are still necessary (eg cleaning materials)

8. INDIRECT LABOUR COST
- Workers who aren’t directly involved in the production process

9. FACTORY OVERHEADS
- Refers to all the costs incurred in order to run the factory

10. FIXED COSTS
- Remain constant within a period of time

11. VARIABLE COSTS
- Costs vary in direct proportion to amount of goods produced

12. TOTAL COST OF PRODUCTION
- Raw Materials, Direct Labour, Factory Overhead Costs