e 
At the level of individual organisations, expenditure on wages and 
salaries clearly represents costs, while for the national economy as a whole, 
the employment of unemployed labourers does not lead to a loss of produc- 
tion elsewhere and therefore does not necessarily constitute cost. Similar 
considerations apply to concealed cost differences between locally produced 
and imported equipment, services or materials in a situation of structural 
shortage of foreign exchange. As a consequence of this, one could state that 
in a situation of structural shortage of foreign exchange the social cost of 
imported equipment, materials and services should be valued more highly than 
the actual expenditure, whereas in a situation of structural unemployment the 
social cost of labour should be valued lower than the actual salary expenditure. 
One should also consider, finally, the situation of a structural shortage of 
skilled labour and value the social cost for this item higher than the salary 
expenditures. 
This concept of social cost has as yet been largely neglected by manage- 
ments of individual organisations. If considered at all, it is only considered by 
decision-making authorities at a higher national level such as a National 
Planning Board. One can however hope and expect that the operational 
significance of the concept will become increasingly evident fairly rapidly, 
particularly in the developing countries. 
Although in the context of this paper priority will be given to the 
development of cost models as valid for individual organisations, the infor- 
mation-generating capacity of these cost models should be verified at a later 
stage, and if necessary modified, in order to serve also the requirements of a 
social cost analysis. 
3.2 The Allocation of Indirect Costs 
It could be quite naive to consider only the direct costs involved in 
establishing cost standards ie the costs directly related to a certain output or 
product, examples of which would be direct labour costs, direct material 
costs, etc. One of the major problems in modern production processes is 
indeed the fact that direct costs are only a fraction of the total costs. One of 
the tasks faced in establishing cost standards is therefore the logical allocation 
of all the indirect costs of an organisation to the actual production processes. 
This allocation has to take place in steps. The different cost categories have