The term direct labour is reserved for those labour costs that can be basically traced to single units of merchandises. Direct labour is sometime called touch labour. since direct labour workers typically touch the merchandise while it is being made. Manufacturing Overhead Cost:

Manufacturing operating expense. the 3rd component of fabrication cost. includes all costs of fabricating except direct stuff and direct labour.

Enumerate and specify the different categorizations of costs On the footing of Nature or Elementss: One of the of import categorization cost is on the footing of nature or elements. Based on elements. it is classified into Material Cost. Labour Cost and Other Expenses. They can be farther subdivided into Direct and Indirect Material Cost. Direct and Indirect Labour Cost and Direct and Indirect Other Expenses. 2 ) On the footing of Function: The categorization of costs on the footing of the assorted maps of a concern is known as function-wise categorization. Here. there are four of import functional divisions in the concern organisation. Viz. ( a ) Production Cost ( B ) Administration Cost ( c ) Selling Cost and ( vitamin D ) Distribution Cost.

3 ) On the footing of Variability: On the footing of variableness with the volume of production cost is classified into Fixed Cost. Variable Cost and Semi Variable Cost. Fixed Costs are those costs which remain changeless with the volume of production. Rent and rates of office and mill edifice are some illustration of fixed cost. Variable costs are those costs incurred straight with the volume of end product. For illustration. cost of stuffs and rewards to workers are the disbursals indictable with direct proportion to the volume of production.

Semi-Variable Costss are those costs incurred partially fixed and partially variable. with the volume of production. Consequently. it has both fixed and variable characteristics. For illustration. depreciations and care cost of works and machinery.

4 ) On the footing of Normality: Costss are classified into normal costs and unnatural costs on the footing of normalcy characteristics. Normal costs are those incurred usually within the mark end product or fixed program.

5 ) On the footing of Controllability and Decision Making: Based on the managerial determination devising and controllability the categorizations are as follows: ( a ) Controllable Cost. ( B ) Uncontrollable Cost. ( degree Celsius ) Sunk Cost. ( vitamin D ) Opportunity Cost. ( vitamin E ) Replacement Cost. ( degree Fahrenheit ) Conversion Cost.

a ) Controllable Costss: Controllable Costss are the costs which can be influenced by the action of a specified figure of an project. Controllable Costss incurred in a peculiar duty Centre which is influenced by the action of the executive header. For illustration. direct stuffs and indirect stuffs.

B ) Uncontrollable Costss: Uncontrollable Costss are those costs which can non be influenced by the action of a specified figure of an project. In fact. no cost is governable ; it is merely in relation to a peculiar person that may stipulate a peculiar cost to either governable or non-controllable. For illustration. rent and rates.

degree Celsius ) Sunk cost: These are historical costs which were incurred in the yesteryear and are non relevant to the peculiar determination devising job being considered. While sing the replacing of a works. the depreciated book-value of the old plus is irrelevant as the sum is a sunk cost which is to be written-off at the clip of replacing. Unlike incremental or decremental costs. sunk costs are non affected by addition or lessening of volume. Examples of sunk cost include dedicated fixed assets. development cost already incurred.

vitamin D ) Opportunity Cost: Opportunity cost means the cost of waiving or giving up an chance. It is the fanciful value of traveling without the following best usage of clip. attempt and money. These indicate the income or possible benefits sacrificed because a certain class of action has been taken. An illustration of chance costs is the market value forgone or sacrificed when an old machine is being used.

vitamin E ) Replacement Cost: Such disbursals may be incurred due to factors like alteration in method of production. an add-on or change in the mill edifice. alteration in flow of production etc. All such disbursals are treated as production operating expenses ; when sum of such disbursals is big. it may be spread over a period of clip.

degree Fahrenheit ) Conversion Cost: Conversion costs are those costs which are incurred while change overing stuffs into semi-finished or finished goods. It is the sum of direct rewards. direct disbursals and overhead costs of change overing natural stuffs into finished merchandises. Differentiate variable and fixed cost

Fixed costs are costs which remain changeless within a certain degree of end product or gross revenues. This certain bound where fixed costs remain changeless regardless of the degree of activity is called relevant scope. Variable costs are costs which change with a alteration in the degree of activity. Examples include direct stuffs. direct labour. etc.