Costing and the changed business environment

Industrial production characterised by:

• Direct-labour-intensive and dire-labour-paced production.

• A low level of overheads relative to direct costs.

• A relatively uncompetitive market.

Overheads represented a small element of total costs.

It was reasonable to charge overheads to individual jobs on a direct-labour-hour basis.

All production was done by direct workers, aided by machinery.

The situation has now changed:

• Capital-intensive and machine-based production.

• A high level of overheads, relative to direct costs.

• A highly competitive international market.

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