XXIV; J. B. Clark, "Essentials of Economic Theory,"
Ch. VII; J. A. Hobson, "The Science of Wealth," Ch.
Vni.
A FACTORY, from the business point of view, is operated for the purpose of producing goods for sale. Commencing with the outlay for raw materials, there costs of is more or less expenditure until the finished production, product is ready for the market. Two items of cost enter directly into the total cost of every manufactured article, namely, materials and labor. The other costs in production not charged directly to any article are called overhead expenses. Material costs include all outlays for materials used in the making of a product entering into and becoming a part of it. Supplies, as coal, oil, small tools, etc. , are necessary overhead materials in every factory, but their cost can- ex penses.
Not be charged to any one article, so must be charged to overhead expenses.
Labor employed may be direct or indirect, sometimes called productive and non-productive. Direct or productive labor is labor employed directly in Direct and the production of an article. All employees indirect directly attending machines or working on materials belong to this class. In every factory, a great many are employed whose work cannot be charged to any particular article, but the outlay for which must be charged to many. These laborers are called non-produc 121
Tive, and include firemen, engineers, helpers, superintendents, sweepers, etc. The outlay for direct labor is charged to labor, while that for indirect to overhead expenses.
Overhead expenses are all expenses which are not charged to direct labor or direct materials. They are Division of nown by various names, as indirect costs, overhead burden, overhead burden, overhead expenses, and running expenses, and are divided into many classes, as rent, light, heat, power, repairs, depreciation, insurance, taxes, non-productive labor, supplies, interest, royalties, legal services, and selling expense....
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