The main costs associated with the production of VectorCal’s drone navigation system are the labor cost and material cost. VectorCal’s drone navigation system has two types of labor cost, direct labor and indirect labor.
Direct labor cost is wages that are incurred in order to produce specific goods or provide specific services to customers. It also includes the payroll taxes associated with those wages, plus the cost of company paid medical insurance, life insurance, workers' compensation insurance, any company matched pension contributions, and other company benefits (Adams, 2014). Indirect labor is the cost of any labor that supports the production process, but which is not directly involved in the active conversion of materials into finished products. Indirect labor cost would include production supervisor, purchasing staff, materials handling staff and materials management staff. The cost of both types of indirect labor can be fully loaded with the costs of benefits and payroll taxes for financial analysis or cost accounting purposes, since these additional costs are closely associated with the indirect labor positions (Adams, 2014).
Direct material cost is the cost of important materials that are used in the manufacture of a product or used in providing a service. Direct material costs are definitely identifiable to the contract. The concept of estimating direct materials costs is very straightforward. It consists of determining what is needed, how much is needed, and figuring the cost of the components Types of direct material cost VectorCal would be associated with is timber, steel, and circuit boards. To determine the amount of direct materials cost in a product, create a bill of materials, which specifies the quantity of each raw material item and component included in a product. Then assign a standard cost to each item, based on recent prices paid for