I am trying to set up a chart of accounts in my accounting software but I am having difficulty in determining how to assign my expenses to a particular account.

We build monuments and in the course of doing this sometimes part of the finished product is partially constructed from raw materials and partly from purchased products. Example: We may purchase the base stone and the upright and do engravings, flashing etc but then we may buy an already finished marble vase to set on either side of the upright. How do I categorize the vase? It is part of the finished product but we may not do anything to it (sometimes we do lettering and design work on them but not always).

Also, if there is an item that has two uses how do I categorize it. For example, I use our copier for office work but we also use it to make graphic transfers for our stones. We buy gas for the vehicles but also use it to wash the stones etc.

I was under the impression that anything that went into the actual making of the finished product would be considered a direct material but I am not so sure anymore. I mean if I use a pencil to make drawings of the design work does the cost of the pencil fall into that category? What if I use a computer to do the drawings?

Please help. I am a little confused.

There is no need to be confused and you must avoid getting into too much detail.
What is usually done when a supply has more than one purpose is to apportion the cost between production costs and for example administrative costs or you would have a finished goods inventory which included both manufacturers and bought in items.

So you would estimate the costs of production originating from the photocopier and transfer these costs to the cost of production. In the same way you would apportion gas between vehicles and production. You can have an indirect supplies account within you manufacturing costs without destroying the integrity of your costing system.

What is more important than categorising the costs of minor processes is to ensure you have a clear costing of each item produced so your pricing is properly set.