Explain the Different Types of Costs

3 Using examples distinguish between fixed and variable costs. Fixed Costs or Supplementary Costs 8.

In This Last Section I Ll Walk You Through The Cost Structure Building Block Of The Business Model Canv Business Model Canvas Budget Planning Success Business

1 Why do accountants distinguish between so many different types of costs.

. Direct indirect fixed and variable are the 4 main kinds of cost. View the full answer. These apportioned costs are called uncontrollable costs.

Explicit Cost and Implicit Cost. Future Cost and Historical Cost 3. Standard cost is a scientifically predetermined cost which is arrived at assuming a specific level of efficiency in material utilization labor and indirect expenses.

Every part of the business is associated with different types of business costs right from production up till marketing and even sales. 2 Using examples distinguish between sunk and incremental costs. Average and Marginal Cost.

In addition to this you might also want to look into operating costs opportunity costs sunk costs and controllable costs. Lets look at types of costs. Even if your output changes or you dont produce anything your fixed costs stay the same.

Fixed costs might include the cost of building a factory insurance and legal bills. We have described these 8 major accounting costs below for further clarification. These groupings broadly separate the many different inventory costs that exist and below we will identify and describe some examples of the different types of cost in each category.

Variable Costs VC Costs which depend on the output produced. Provide examples to explain your answers. The following points highlight the eight main types of costs involved in cost of production and revenue.

Fixed and Variable Costs 7. Fixed asset cost which is used in production is measured in terms of depreciation and. The cost of labor for instance which is used to produce goods or render services is measured in terms of benefits or raises or even salaries.

The different types of cost concepts are. Normal Cost It is a cost which normally incurred in achieving a certain level of output under certain conditions. This cost varies with the variation in the basis of allocation and is independent of the actions of the executive of that department.

Outlay costs and Opportunity costs Accounting costs and Economic costs DirectTraceable costs and IndirectUntraceable costs Incremental costs and Sunk costs Private costs and social costs Fixed costs and Variable costs. Here the costs are divided as they are allocated to different functions in the company like Production costs Commercial costs Administration Costs Distribution Costs Distribution Costs Distribution cost is the total of all expenses incurred by the producer to make possible the delivery of the product from its location to the location of the end customer. Examples include direct materials direct labor and sales commission based on sales.

This means taking care of internal issues and making sure high quality products are shipped to the customer. This article throws light upon the six types of cost of capital. Replacement cost is the cost required to replaced any existing asset at present.

4 Fixed costs are always irrelevant in decision making. Average cost AC is also referred to as unit cost and is given as total cost divided by output. Incremental and Sunk costs.

2 By Functions. Direct costs are those cost that have directly accountable to specific cost object such as a process or product Exwages paid salary paid labor materialetc Indirect cost. Cost of finding suppliers and expediting orders.

Ordering costs include payroll taxes benefits and the wages of the procurement department labor costs etc. A Fixed Cost These are the costs which are incurred for a period and which within certain output and turnover limits tend to be unaffected by fluctuations in the levels of activity output or turnover. The 4 main categories of quality costs include.

The more the output is produced the higher the total cost of production. Accounting questions and answers. Total cost TC as its name implies is the total cost of producing a given output.

They do not tend to incr. Other Types of Cost. These costs are typically included in an overhead cost pool and allocated to the number of units produced in each period.

Abnormal Cost It is the cost which is not normally. Incremental cost also known as different cost is the additional cost due to a change in the level or nature of business activity. Cost Type 1.

These types of costs are expected and incurred in the days to come. Examples include rent insurance and depreciation using the straight line method. Explicit Cost and Implicit Cost 2.

Types of Costs. Historical Cost It refers to the actual cost of acquiring an asset or producing a product or service. Variable costs - vary in total in proportion to changes in activity.

Ordering holding and shortage costs make up the three main categories of inventory-related costs. Fixed costs - costs that remain constant regardless of the level of activity. Indirect cost are those costs which are not directly accountable to specific cost object or not directly related to production Ex.

Cost Driver is an essential source for allocating the costs Allocating The Costs Cost Allocation is the procedure of recognizing assigning costs to different cost objects like a product department program customer etc as per the cost driver serving as the base for this process. Producing more units requires the use of more resources. Overall Cost of Capital.

The types of costs include the costs which can be avoided if there were no product or service defects before they were delivered to the customer. In the above example fixed costs are always 1000.

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