definiens: . Fully - Burdened Manufacturing Cost means the consolidated fully burdened cost incurred by [COMPANY] in the manufacture of Product, consisting of : ( i ) direct labor costs ( salaries, wages and employee benefits ) ; ( ii ) direct materials costs ; ( iii ) operating costs of facilities and equipment, excluding any surplus or idle capacity costs ; ( iv ) a charge for depreciation, repairs and maintenance costs of facilities and equipment ; ( v ) quality and in - process control costs ; ( vi ) a charge for overhead costs for raw material and manufacturing administration and management, materials management, storage and handling, and manufacturing and employee training ; and ( vii ) charges for spoilage, scrap or rework costs ; and ( viii ) royalties that are paid to a Third Party for manufacture of Product ; in each of the above cases to the extent reasonably allocable to the manufacture of Product as determined in accordance with United States generally accepted accounting principles . To the extent that manufacturing of Product or any component thereof is performed for [COMPANY] by a Third Party, amounts paid by [COMPANY] to such Third Party in connection with the manufacturing of Product or any component thereof will be added to the aggregate amount of the foregoing items ( i ) through ( viii )