PRODUCTION COST, FACTORY COST & ADMN. COST & SELLING & DISTRIBUTION COSTS

Production Cost : These are the costs incurred for sequence of operations in production. Production cost includes the following :
a) Direct materials
b) Direct labour
c) Direct Expenses
d) Factory overheads which include factory indirect materials, indirect labour and indirect expenses.

B) Administration cost.: These are the costs incurred for formulating policies, directing the organisation and controlling the operations of the undertaking. These costs are usually in the nature of indirect expenses and are not directly related to production or selling or distribution or research or development function of the organisation.
Administration cost generally includes the following :
a) Salaries of office staff, accountants, directors, etc,;
b) Maintenance of assets of office;
c) Rent, rates and depreciation of office building;
d) Postage, stationery, telephone etc.
e) Office supplies and expenses;
f) General Administration expenses.
C) Selling and Distribution Cost :
Selling cost is the cost of seeking to create and stimulate demand and of securing orders.
Distribution cost is the cost incurred in connection with the distribution or delivery of the goods to customers after manufacturing is completed.


Selling and Distribution Costs are in the nature of indirect cost and include the following :
a) Salaries and commission of salesman and sales manager;
b) Expenses on advertisement;
c) Salaries of warehouse staff and transport staff;
d) Rent & Rates of show room & Sales office;
e) Cost of insurance, freight out, export duty, packing, shipping etc.
f) Maintenance of transport vans;