Materials, labour and overheads: the three kinds of cost
Every cost is materials, labour or an overhead. Sort a month of costs for a furniture workshop and add up each kind.
In this room: 2 tasks, 8 questions
- The three elements of cost4 questions
- Sorting a month of costs4 questions
Every cost of a business that makes things is one of three kinds. They are called the elements of cost.
- Materials
- the things that are bought and used, such as wood, screws and glue
- Labour
- the pay of the people who work for the business
- Overheads
- every other running cost, such as rent, electricity and insurance. Also called expenses
Fernhill Furniture makes oak dining tables in a rented workshop.
Answer the questions below
3 more questions follow in this task.
Sorting costs by element shows where the money goes. This is what Fernhill Furniture spent in May.
| Cost | Amount |
|---|---|
| Oak boards | 43,000.00 |
| Glue and sandpaper | 500.00 |
| Wages of the workers who make the tables | 21,000.00 |
| Supervisors' salaries | 5,200.00 |
| Rent of the workshop | 4,000.00 |
| Electricity | 600.00 |
| Insurance | 700.00 |
The supervisors do not build tables, but their salaries are still labour. Labour is all pay.
Answer the questions below
3 more questions follow in this task.