This paper presents a multilateral comparison of relative levels and structures of costs of production in Japan, the US and West Germany. The analysis is carried out by using harmonized input-output tables, which are converted at US prices by using adjusted sectoral purchasing power parities. A new accounting methodology is derived from the recent developments of index number theory assuring that the results be invariant with respect to the order of comparison of the pairs of countries under examination. The analytical novelty of the paper is the decomposition of costs of production into the direct and indirect costs of primary inputs (in previous studies the decomposition analysis was confined only to the direct costs). This decomposition procedure is based on an appropriate Leontief-type accounting system so that intermediate input costs are properly accounted for by decomposing them into incorporated primary-input costs and indirect productivity effects. The empirical results show that in 1985 the US exhibited a higher productivity level in both the direct and indirect primary factor inputs. At the same time, Japan achieved a higher competition than the US in some key sectors, mainly because of relative low levels of labour compensation. West Germany exhibited the lowest levels of prices, mainly because of low profit rates.