definiens: means ( a ) the direct material and labor costs associated with manufacturing the Products, ( b ) overhead allocable to manufacture of the Products and ( c ) the amount paid to Third Parties to acquire manufactured Products, whether or not completed, and ( d ) Distribution Costs . Direct material costs include the costs of purchasing raw materials and packaging components . Direct labor includes the costs of employees directly employed in Product manufacturing, quality control or packaging . Overhead allocated to manufacture of the Products shall be limited to ( i ) a reasonable allocation of the cost of employees who have a direct relationship with Product manufacturing, quality control or packaging, but who are not classified as direct labor, which allocation shall be based on each such employee 's time spent in Product manufacturing, quality control or packaging as compared to time spent on all such employee 's work, and ( ii ) a reasonable allocation of facilities ' costs allocable to Product manufacturing, quality control and packaging . Manufacturing Costs shall be determined on a reasonable and typical basis consistent with TBC 's internal cost accounting system and reasonable industry practice or on actual charges from Third Parties