Cost Element

Cost element is a category of cost that is used in cost accounting to categorize and track the various costs incurred by a business.

Primary costs:

Primary Costs are directly associated with a monetary flow, a cost that is directly related to the production or delivery of a product or service.

• can be traced directly to a specific product, service, or revenue stream.

• Example: Labor costs (wages, salaries),
                   Raw Material or Direct Materials,
                   Packaging costs,
                   Shipping and Handling costs.

Secondary Costs:

Secondary Costs refers to indirect costs, that are not directly related to the production or service.

• Overhead expenses that are incurred in addition to direct costs

• Example: Material Overhead,
                   Advertising,
                   Taxes,
                   Insurance Premiums,
                   Research and Development cost.