Question

Name any two basic elements of cost. Give an example of each.

Answer 1

The three basic elements of cost are material, labour and expenses. Any two are explained below:

1. Material Cost: Material cost refers to the cost of the materials used to make the product. Materials enter the production process and become part of the final product.
   Example: The cost of sugarcane in the production of sugar in a sugar mill, or the cost of cloth used in dress making.
2. Labour Cost: The labour cost is the cost of human effort necessary to convert the material into the finished product. It is the total amount of compensation paid to employees, supervisors, and managers.
   Example: The wages paid to the workers employed in a sugar mill, or wages paid to a machine operator in a furniture factory.