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Cost Accounting Assignment

The document discusses direct costs, providing examples like direct labor, materials, and manufacturing supplies. It also outlines the steps to calculate direct costs, which include listing all direct costs involved, mentioning the direct cost of each expense, and adding up all the direct costs associated with the production process.

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Haris Khan
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Download as DOCX, PDF, TXT or read online on Scribd
27 views

Cost Accounting Assignment

The document discusses direct costs, providing examples like direct labor, materials, and manufacturing supplies. It also outlines the steps to calculate direct costs, which include listing all direct costs involved, mentioning the direct cost of each expense, and adding up all the direct costs associated with the production process.

Uploaded by

Haris Khan
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Cost Accounting Assignment

Explain direct cost with examples also show steps of it.

The Direct Cost of an item is the portion of that item's cost that can be wholly
assigned to the production of that item. Direct cost typically refers to materials, labor
and expenses associated with the production of an item. Small businesses that
understand the importance of calculating the direct costs of their items or services can
seek out options to lower costs and increase profits.

Direct Costs Examples

Any cost that's involved in producing a good, even if it's only a portion of the cost
that's allocated to the production facility, are included as direct costs. Some examples
of direct costs are listed below:

 Direct labor
 Direct materials
 Manufacturing supplies
 Wages for the production staff
 Fuel or power consumption

Steps to Calculate Direct Cost


Direct costs make the largest portion of the budget. Therefore, it is important to learn
and calculate them so that they can be minimized and profit can be increased.

As direct costs are directly associated with a single process and cannot be used for any
other process, the direct costs involved in a project can be calculated by simply adding
all direct costs in the process.

Next, you will learn step by step the process to calculate the direct costs.

1. List All The Direct Costs Involved In The Process


There are various direct costs involved in the production process. It is advisable to
make a list of all possible direct costs before you prepare a budget. A budget is needed
to be allotted for the production process. The budget can be prepared by calculating
all types of direct costs such as cost of raw material, labor cost, machinery cost,
consumable supplies’ cost, packaging cost, and sales commission.
2. Mention The Direct Cost Of Each Expense
In the next step, assign the value of direct cost for each expense. The value can’t be
picked randomly. It should be calculated as per the requirement of the production
output.

The raw material is the most important part of the production process. The production
process can’t even begin without having the raw material.

3. Add Up All the Direct Costs Associated With The Production Process
The total direct cost of the production process will be calculated by adding up all the
direct costs of the production process.

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