What are Input Costs?

Input cost is the set of costs incurred to create a product or service. All other costs incurred by a business are related to general and administrative activities. The proportion of input costs to total costs tends to be relatively low in many businesses.

Examples of Input Costs

There are only a few classifications of costs that are considered input costs. They are as follows:

Direct materials. This is the materials consumed during the process of constructing a product.
Direct labor. This is the labor consumed during the process of constructing a product, and is typically limited to people working on the shop floor. If a business provides services, then direct labor includes the cost of those people in the field who are providing those services.
Factory overhead. This is all other costs associated with the production process. Examples of these costs are factory utilities, factory rent, the cost of production supervisors, the cost of the materials management and purchasing employees, and the depreciation on factory structures and equipment.