Component Cost

The various components of cost are:

1. Prime cost
2. Factory cost
3. Office cost
4. Total cost

Prime Cost

It consists of direct material cost, direct labor cost and direct expenses.

i.e. Prime cost = Direct material cost + Direct labor cost + Direct expenses.

Prime cost is also named as Direct Cost.

Factory Cost

It consists of prime cost and factory expenses.

i.e. Factory cost = Prime cost + Factory expenses.

Factory cost is also named as works cost.


Office Cost

It consists of factory cost and administrative expenses.

i.e Office cost = Factory cost + Administrative expenses.

Office cost is also named as manufacturing cost or cost of production.

Total Cost

It includes office cost, and selling and distribution expenses.

i.e. Total Cost = Office cost + Selling expenses + Distribution expenses.

Selling Price

If the profit is added in the total cost of the product it is called selling price. The customers get the products by paying the price which is named as selling price.

The relation between the elements of cost and components of cost can be best illustrated by the chart given below.

The relation between the elements of cost and components of cost can be best illustrated by the chart given below.

Selling Price

This can also be illustrated by the block diagram.

Component Cost

Next Chapters

Estimating Procedure
Difference between Estimating & Costing
Depreciation & Obsolescence
Material Cost Calculation
Calculating Labor Cost
Direct and Indirect Expenses
Component Cost
Machine Shop Estimating
Forging and Forging Types
Starting an Organization
Welding Cost Estimation
Jigs and Fixtures
Qualities of an Entrepreneur
Starting Small Scale Industries
Budget and Budgetary Control
Supply & Law of Supply
Exchange and Barter Exchange
Classification of Market
Money and Types of Money
Trade Cycle
Break Even Analysis
Financial Management

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