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Cost Classification Detailed

Classification of cost involves grouping costs into categories based on nature, function, behavior, time, control, and decision-making. Key classifications include direct vs. indirect costs, production vs. administrative costs, and fixed vs. variable costs. This process aids in analysis, control, and informed decision-making.

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4 views1 page

Cost Classification Detailed

Classification of cost involves grouping costs into categories based on nature, function, behavior, time, control, and decision-making. Key classifications include direct vs. indirect costs, production vs. administrative costs, and fixed vs. variable costs. This process aids in analysis, control, and informed decision-making.

Uploaded by

selamferfre
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Classification of Cost

Classification of cost is the process of grouping costs into different categories based on their nature,
function, behavior, or purpose to help in analysis, control, and decision-making.

1. By Nature: Direct costs (e.g., raw materials, labor) and indirect costs (e.g., rent, electricity).

2. By Function: Production costs (making goods), administrative costs (office expenses), and
selling & distribution costs (marketing, delivery).

3. By Behavior: Fixed costs (rent), variable costs (materials), and semi-variable costs (mixed).

4. By Time: Historical costs (past) and future costs (estimated).

5. By Control: Controllable costs and uncontrollable costs.

6. By Decision Making: Relevant costs, irrelevant costs, and opportunity costs (benefit lost when
choosing another option).

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