Finance in Hospitality

Finance in Hospitality

 Cost simply can be defined as the sum of amount that an entity had
paid or required to pay for acquisition of required sources for
production purpose.
 In economics, cost can be referred as monetary valuation of
material, time, value, utility, labor, risk, efforts and opportunity
forgone in the manufacturing functions.
2.1 Meaning of cost

 Material
 Labor
 Overhead
Total Cost (TC) = Material + Labor + Overhead
Element of cost

Contd...

 Direct Material: Timber in furniture manufacturing,
textile in garment industry, gold used for jewellery
making
 Direct Labor: Employees directly engaged in
production process
 Direct Overhead: architect fees, patent and royalties.
consultant fees
Traceability: Direct cost

 Indirect Material: Oil for machine lubricating, nails
for furniture, thread for garments
 Indirect Labor: Supervisor, office staff, distribution
and selling departmental staff
 Indirect Overhead: Rent, factory insurance, tax paid,
depreciation and others
Traceability: Indirect cost