Chapter 18, Problem 18SP

To determine

Direct Material, Direct Labour and Factory Overheads:

Direct material cost is a material cost which is directly identified in the manufacturing of the product.

Direct labour cost is a labour cost which is directly identified in the manufacturing of the product.

Factory overheads is an indirect cost associated with the manufacturing product and which cannot be directly identified in the production of product.

Direct costs are generally variable in nature i.e. changes with the level of production activity and Indirect costs are fixed in nature as it does not normally change with the change in the level of production activity.

The Classification of various cost in direct/ Indirect and Variable/ Fixed cost.