✦ Direct Labor:
- Description: Wages and benefits paid to employees who are directly involved in the production.
- Example: A factory worker’s hourly wage in a manufacturing plant.
✦ Direct Materials:
- Description: The raw materials that are used to produce a finished product.
- Example: Wood used to make furniture in a carpentry shop.
✦ Manufacturing Overhead:
- Description: Indirect costs associated with manufacturing, not tied to a specific product.
- Example: Factory utility bills or depreciation of manufacturing equipment.
✦ Freight and Shipping:
- Description: Costs associated with transporting raw materials to the factory or finished goods to the customers.
- Example: Shipping fees paid to a courier service for product delivery.
✦ Factory Maintenance:
- Description: Costs incurred to maintain and repair machinery and equipment.
- Example: Costs of replacing a broken part on a production line machine.
✦ Quality Control:
- Description: Costs associated with ensuring products meet company and industry standards.
- Example: Salaries of quality assurance inspectors in a food processing plant.
✦ Depreciation:
- Description: The allocation of the cost of tangible fixed assets over their useful lives.
- Example: Depreciation of a pizza oven in a restaurant over its expected 10-year lifespan.
✦ Work-in-Process:
- Description: Costs of partially completed goods that are still in the production process.
- Example: The accumulated costs of an incomplete batch of wine in a winery.
✦ Indirect Labor:
- Description: Wages for employees not directly involved in production but necessary for the process.
- Example: Salary of the maintenance team in a manufacturing plant.
✦ Indirect Materials:
- Description: Materials used in the production process but not traceable to a specific product.
- Example: Lubricants and cleaning supplies for machines in a factory.
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