Question 1
Classification by nature
This requires that the costs of a manufacturing entity be classified on three major types, that include, materials, labour and expenses Material cost -refers to the costs incurred in the production of a particular product or to provision of a service.
Labour cost- refers to the total expenditure incurred by an entity on its employees for their services Expenses- resources incurred by a firm to generate its income
The major categories include
i) Changes in cost of work -in - process and finished goods
ii) Cost of raw materials used
iii) Depreciation and amortization of plant machinery and equipment
iv) Employee benefits
v) Other expenses that include all items that meet expenses definition but not classified by the specified above
vi) Finance costs which are incurred in obtaining funds used by management to operate the entity in form of interests and dividends.