Cost items are actually quite complex, but in simple terms, they are the expenses related to product production and project management. First of all, there are direct material costs, which are those raw materials, main materials and auxiliary materials used in the manufacture of products, as well as purchased semi-finished products. These materials are the main part of the product, so the cost has to be counted.
Then, there is the fuel and power cost, which is the fuel consumed and the power resources used in the production process. Direct wages are also counted, which are the wages and benefits of employees directly related to the production of products. And, of course, there are the loss of scrap products, including those that are irreparable and the cost of repairing repairable scrap.
Workshop expenses also have to be considered, that is, the expenses incurred in managing and organizing workshop production, such as equipment depreciation, maintenance costs, etc. There are also enterprise management fees, which are expenses incurred by management activities at the plant-wide level, such as administrative salaries, office expenses, etc.
Don't forget that there are other direct expenses, which are those that are directly used for the production of the product, which may include the use of special tools, inspection fees, etc. In addition, the cost of survey and design must also be calculated, which is the cost of project survey and design, which is usually spent at the beginning of the project.
Decision-making costs also have to be considered, that is, before the project starts, in order to decide whether to do the project or not, you have to do market research and data analysis, and these expenses must also be included in the cost. There is also the cost of tendering, if the project needs to be outsourced to another company, then the costs incurred in the bidding process must also be taken into account.
In general, cost items include all expenses directly or indirectly related to product production and project management, not only direct production expenses, but also the costs of organizing and managing the production process. Understanding these cost items is important to control costs and make business decisions.