Scribd
Upload
21 views28 pages

Cost Classifications in Economics

The document outlines key concepts in cost accounting, including classifications of costs such as variable, fixed, and mixed costs. It also discusses cost classifications for assigning costs to objects, including direct, indirect, and common costs, as well as decision-making costs like differential, incremental, opportunity, and sunk costs. The content is part of a course on Principles of Economics and Cost Accounting, taught by Sharmin Akter Urmee.

Uploaded by

Jayed Ahmed
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
21 views28 pages

Cost Classifications in Economics

The document outlines key concepts in cost accounting, including classifications of costs such as variable, fixed, and mixed costs. It also discusses cost classifications for assigning costs to objects, including direct, indirect, and common costs, as well as decision-making costs like differential, incremental, opportunity, and sunk costs. The content is part of a course on Principles of Economics and Cost Accounting, taught by Sharmin Akter Urmee.

Uploaded by

Jayed Ahmed
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

IPE 4439

Principles of Economics
and Cost Accounting
Course Teacher: Sharmin Akter Urmee
Lecturer, Department of MPE
Room No: 111, Old Academic Building
CHAPTER 2

Cost Terms, Concepts,


And Classifications
General Cost Classifications
General Cost Classifications
Income Statement
Income Statement
Cost Flows and Classifications in a Manufacturing
Company
An Example of Cost Flows in a Manufacturing Company
Cost classifications for predicting cost behavior

Variable cost
A cost that varies, in total, in direct proportion to changes in the level of activity. A

variable cost is constant per unit.

Fixed cost
A cost that remains constant, in total, regardless of changes in the level of activity
within the relevant range. If a fixed cost is expressed on a per unit basis, it varies

inversely with the level of activity.

Mixed costs
Costs that contain both variable and fixed cost elements.
Cost Classifications for Assigning Costs to cost objects
Cost object
Anything for which cost data are desired.

Direct cost
A cost that can be easily and conveniently traced to the particular cost object under
consideration.

Indirect cost
A cost that cannot be easily and conveniently traced to the particular cost object under
consideration.

Common cost
A cost that is incurred to support a number of cost objects but cannot be traced to any
of them individually.
Cost Classifications for Decision Making
Differential cost
A difference in cost between any two alternatives.

Incremental cost
An increase in cost between two alternatives.

Opportunity cost
The potential benefit that is given up when one alternative is selected over
another.

Sunk cost
Any cost that has already been incurred and that cannot be changed by
any decision made now or in the future.

You might also like