However, the manufacturer views cost in a very different way. Another way of looking at these costs is to break them down into just three elements. These are direct material, direct labor, and factory burden. For example, a piece of wood used to repair the factory roof is not direct material, since is cannot be identified with the manufacture of the product. Labor and direct labor are also two different things.
Direct labor is the labor costs which are directly related to production of a certain item.
This would consist of an employee doing work on a specific job order. However, it would not consist of a janitor sweeping the floors of the factory. Factory burden is the third element. A few examples of this would be taxes, insurance, rent, maintenance, power, light, heat, and supervision. Now that cost has been defined, now the actual cost accounting can come into play.