Elements of Manufacturing Cost

1. Direct Materials: The cost of material which become part of the product being manufactured and
which can be readily identified with a certain product. Materials that cannot be readily identified with
any particular item manufactured are called indirect materials.

2. Direct Labor: The cost of labor for those employees who work directly on the product manufactured.
The wages and salaries of employees who are required for manufacturing process but who do not work
directly on the units being manufactured are considered indirect labor.

3. Factory Overhead: Includes all costs related to the manufacturing of a product except direct materials
and direct labor.