classification of manufacturing costs

classification of manufacturing costs

We can classify the manufacturing costs into 3 terms :

Direct material costs : 

The whole costs that are paid for all materials that will be a part of the cost object , it reflects the first or the beginning point of the finished good or the final product and can be easily traced to the cost object

Example for the direct material, the computer chips that are used in manufacturing the smart phones ( a very important component )

Hint

The acquisition costs of direct material includes delivery charges, sales taxes, customs & duties

Direct manufacturing labor costs :

The whole costs that have been paid for all manufacturing labor that can be easily traced to the cost object

For example 

the wages paid to machine operators who add something to the product to convert it into a finished good

For example 

a company that is producing milk with strawberry flavor

" the wages paid to the flavor machine operators which adds the flavor to the milk is a direct manufacturing labor costs

In direct manufacturing costs :

Are the whole manufacturing costs "variable and fixed" that are related to the cost object but cannot be traced to the cost object in an economically feasible way

For example

plant rent , wages paid for workers on the plant , the salary of guarding labor , salary of the plant management

Hint

The in direct manufacturing costs have another name which is manufacturing overhead costs