Name any two basic elements of cost. Give an example of each.

The three basic elements of cost are material, labour and expenses. Any two are explained below:

1. Material Cost — Material cost is the cost of substances from which the product is made. Materials enter the production process and form part of the finished product.

Example: The cost of sugarcane in the production of sugar in a sugar mill, or the cost of cloth used in dress making.

2. Labour Cost — Labour cost is the cost of human effort required for converting the material into the finished product. It is the aggregate amount of remuneration paid to workers, supervisors and managers.

Example: The wages paid to the workers employed in a sugar mill, or wages paid to a machine operator in a furniture factory.