Cost Accounting Elements of Cost - Accounting Basics

What are the different elements of cost in Cost Accounting?

The various elements of costs along with their classification is depicted below:

Elements of Cost

Direct or Indirect Materials

Direct materials directly contribute to the product and are easily identifiable in the finished product. Some of the examples of direct material are paper in book, wood in furniture, leather in shoes etc. Direct materials are known as high-value items. The indirect material are those supporting material used in production, For instance, nails in shoes or furniture.

Direct Labor

The wages paid to the workers that directly relate to any activity of production, supervision, maintenance, material transportation are known as direct labour.


Overheads are the indirect expenses such as material, labour etc. which are classified into:

  • Production or manufacturing overheads
  • Administrative expenses
  • Selling Expenses
  • Distribution expenses
  • Research and development expenses

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