Definition Direct overhead can be defined as costs that are incurred during the production process, regardless of the output that the company produces. In other words, this is the cost that the company has to pay, regardless of the level of output they operate. Unlike costs like direct material, which are variable and directly proportionate

Definition Raw materials are the resources that are utilized by the company to produce its goods and services for purposes of resale. Raw materials can broadly be categorized into two categories, which are direct materials and indirect materials. As far as direct materials are concerned, they are used within the final product. Without direct materials,

Definition Direct Labor Costs can be defined as payroll costs that are incurred to manufacture a certain product. These are the costs that can directly be traceable and attributable to a certain product. In other words, direct labor can also be referred to as the wages that are paid to employees and the payroll who

Definition Finished Goods are goods that have undergone the manufacturing process, or goods that have been procured for purposes of reselling, and are in the possession of the company, but have not been sold yet. In other words, finished goods are complete and ready to be sold units, which are in the company’s possession. These

Definition Indirect Materials can be regarded as a category of indirect costs. They are materials that are used within a production process, but cannot be individually traced to a certain product. In other words, it can be seen that these are the costs that are mainly incurred holistically within the production or manufacturing process, but

Definition Work in progress includes goods that are partially completed, and are still in the production process. These are items that are mainly undergoing a certain process in the production cycle and are likely to be in-between places or different workstations. The items that are currently Work in Progress do not include raw materials or

Definition Direct materials can be referred to as the raw materials which are used to produce goods and services which the company manufactures for purposes of reselling. They are the costs that are directly associated with the manufacturing process, and therefore, they can easily be traced to the production process. Items that are listed as

What is Prime Cost? Prime cost is defined as the accumulation of all costs directly incurred during the manufacture of a product. Prime cost is also known as a direct cost, flat cost, or first cost. Prime cost includes all costs directly attributed to the production of output, and consists of expenses like direct material,

Distribution: Distribution cost is the sum of all expenses (direct and indirect) incurred by any company, firm, individual, or any other entity to deliver their products from the production department to the end consumer. Distribution costs are also known as distribution expenses and they are records in the income statement of the entity by using