Define raw materials, components, direct labour, and direct expenses. Provide four examples of factory overhead.

1Xa.
i. Raw material and component * Raw material refers to the basic substances in their natural or unprocessed state that are used in the manufacturing process to create a finished product. They undergo significant transformation. * Example: Timber used to make furniture. * Component refers to a finished part or sub-assembly that is incorporated into a larger product without further transformation. * Example: Tires used in the assembly of a car.

ii. Direct labour * Direct labour refers to the wages paid to employees who are directly involved in the manufacturing of a product and whose time can be directly traced to specific units of output. * Example: Wages paid to a baker for making bread.

iii. Direct expenses * Direct expenses are costs, other than direct materials and direct labour, that are incurred specifically for a particular product, service, or job and can be directly traced to it. * Example: Royalties paid for using a specific patent to produce a product.

b. Four examples of factory overhead: * Fuel and power * Lubricants * Factory insurance * Depreciation: Plant and machinery