Direct raw material costs -- costs of raw materials used to make a specific product.

Direct labour costs -- costs of labour used to make a specific product.

Overheads -- costs that cannot be charged directly to a specific product.

Fixed overheads -- stable costs that occur regardless of whether or not goods are being produced (i.e. rent of factory). These are allocated according to the number of machine hours.

Variable overheads -- changeable overhead costs that vary according to the number of goods produced (i.e. water and lights). These are allocated according to the number of labour hours.

Indirect raw material costs -- costs of raw materials whose role in the manufacturing of a product cannot be easily determined (i.e. glue).

Indirect labour costs -- costs of labour that cannot be charged to a particular product (i.e. the floor sweeper in a factory).

Primary production costs = direct labour + direct raw materials

Overhead expenses = fixed overheads + variable overheads

Total production costs = primary production costs + overhead expenses