Components of Total Cost

1.      Prime Cost

Prime cost consists of costs of direct materials, direct labors and direct expenses. It is also known as basic, first or flat cost.

2.      Factory Cost

Factory cost comprises prime cost and, in addition, works or factory overheads that include costs of indirect materials, indirect labors and indirect expenses incurred in a factory. It is also known as works cost, production or manufacturing cost.

3.      Office Cost

Office cost is the sum of office and administration overheads and factory cost. This is also termed as administration cost or the total cost of production.

4.      Total Cost

Selling and distribution overheads are added to the total cost of production to get total cost or the cost of sales.

Various components of total cost can be depicted with the help of the table below:

Components of total cost
Direct material Direct labor Direct expenses	Prime cost or direct cost or first cost
Prime cost plus works overheads	Works or factory cost or production cost or manufacturing cost
Works cost plus office and administration overheads	Office cost or total cost of production
Office cost plus selling and distribution overheads	Cost of sales or total cost