Cost apportionment is the method of charging a proportion of a cost to a cost centre or cost unit because these cost centres or units share in incurring those costs without directly incurring them. A basis of apportionment is always required.
A cost unit represents a unit of production for which costs are aggregated. It can vary from a single item like a chair or light bulb to a sub-assembly in more complex products like an aircraft wing or gearbox. In cases where individual unit costs are minimal, cost units might be expressed as batches.
A direct hour is the time spent working directly on a product, service, or cost unit within an organization. It is measured in direct labor hours, machine hours, or standard hours.
An hour spent working on a product, service, or cost unit produced by an organization by those operators whose time can be directly traced to the production. Direct labour hours are sometimes used as a basis for absorbing manufacturing overheads to the cost unit in absorption costing.
Direct materials cost is the expenditure on materials that are used directly in the production process to manufacture a product. This cost is a part of various costing methods and significantly influences the overall production cost.
Indirect costs, also known as indirect expenses, are expenses that cannot be traced directly to a product or cost unit and are therefore considered overheads.
Process costing is a method of cost accounting used where production is continuous, and the cost per unit is derived by spreading production costs equally across all units produced in a specific time period.
The total of all the costs incurred in producing a product or cost unit. In a manufacturing account, the production cost is represented by the total of the direct cost of sales and the manufacturing overhead.
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