Absorption/Total Costing - Costing Terms

• Direct costs - costs which are directly attributable to a product or service.
• Direct labour - cost of employing those workers who are actually engaged in the production of goods or providing services.
• Direct materials - cost of materials which actually form part of the goods being produced.
• Direct expenses - other expenses directly connected with the goods/services provided.
• Prime cost = direct labour + direct expenses
• Indirect expenses - any expenses other than direct expenses.

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