Cost , Elements of Costs , Cost function

                            Cost

An amount that has to be paid or given up in order to get something is called cost of that product or goods or service . 

   In other words , An amount to be paid or given up for acquiring any resources or service is called cost . 

          -: Elements of Cost :- 

The various element of cost are given as - 

1- Material cost 

2- Labour cost

3- Expenses 

1- Material Cost :- The cost of material or the commodity used by the organisation for its production purpose is known as material cost . 

       It can be -

(i)- Direct material cost

(ii)- Indirect material cost

(i)- Direct material cost - Direct material cost forms n integral part of the finished product and is identified with the individual cost center . 
Ex.- Purchased raw material .

(ii)- Indirect material cost - Indirect material cost is used for ancillary( auxillary ) purpose of the business and can not be conveniently identified with the individual cost center. 
Ex.- Consumable stores ,Oil etc.

2- Labour Cost:- The cost , incurred in the form of remuneration paid to the employees or labours of the organisation is known as labour cost.

It also can be- 

(i)- Direct Labour Cost

(ii)- Indirect Labour Cost

(i)- Direct Labour Cost- Direct labour cost is the cost incurred on those employees who directly take part in the manufacturing process and easily identified with the individual cost center .

(ii)- Indirect Labour Cost- Indirect labour cost is the cost incurred on those employees who do not directly take part in the manufacturing process and cannot identified with the individual cost center.

3- Expenses :- The costs of services provided to the organisation is known as expenses . 

           It also can be- 

(i)- Direct Expenses

(ii)- Indirect Expenses

(i)- Direct Expenses:-  Direct expenses are the expenses which can be directly identified with the individual cost centers . 

Ex.- Hire charges of machinery etc.

(ii)- Indirect Expenses:- Indirect expenses are the expenses which cannot be directly identified with the individual cost centers . 

Ex.- Rent, lighting etc.

                         -: Cost Function :- 

A function which represent the relationship between output and costs is known as cost function . 

                              The nature of cost function depends on the time horizon . 

        A cost function may be written as -

           C=f(QR)

where, 

            C= Total production Cost

             Q= Quantities of input 

              P= Price of relevant input