Scribd Logo
Upload

Welcome to Scribd!

  • Classification of Cost

    Uploaded by

    Rizve Ahmed
    40 views2 pages
    The document classifies costs based on their behavior and elements. It discusses three types of costs based on behavior: 1) Fixed costs remain constant regardless of output up to capacity and depend on time rather than production. They include rent, taxes, and salaries. 2) Variable costs change directly with output. Materials, labor, and expenses vary directly with production quantity. 3) Semi-variable costs are partly fixed and partly variable, remaining constant up to a certain level of output then changing as output increases further. Examples include maintenance and telephone charges.

    Original Description:

    Classification Of Cost

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    DOC, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document classifies costs based on their behavior and elements. It discusses three types of costs based on behavior: 1) Fixed costs remain constant regardless of output up to capacity and depend on time rather than production. They include rent, taxes, and salaries. 2) Variable costs change directly with output. Materials, labor, and expenses vary directly with production quantity. 3) Semi-variable costs are partly fixed and partly variable, remaining constant up to a certain level of output then changing as output increases further. Examples include maintenance and telephone charges.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    40 views2 pages

    Classification of Cost

    Uploaded by

    Rizve Ahmed
    The document classifies costs based on their behavior and elements. It discusses three types of costs based on behavior: 1) Fixed costs remain constant regardless of output up to capacity and depend on time rather than production. They include rent, taxes, and salaries. 2) Variable costs change directly with output. Materials, labor, and expenses vary directly with production quantity. 3) Semi-variable costs are partly fixed and partly variable, remaining constant up to a certain level of output then changing as output increases further. Examples include maintenance and telephone charges.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    of 2

    1.1.

    CLASSIFICATION OF COST
    Cost classification is the process of grouping costs according to their common features. Costs are to be classified in such a manner that they are identified with cost center or cost unit. ON THE BASIS OF BEHAVIOUR OF COST Behavior means change in cost due to change in output. On the basis of behavior cost is classified into the following categories: a) Fixed cost b) Variable cost c) Semi-variable cost ON THE BASIS OF ELEMENTS OF COST a) Direct material b) Direct labor or direct wages c) Direct expenses or chargeable expenses d) Indirect cost e) Indirect material f) Indirect labor g) Indirect expenses

    1.2. ON THE BASIS OF BEHAVIOUR OF COST


    Fixed cost It is that portion of the total cost which remains constant irrespective of the output upto capacity limit. It is called as a period cost as it is concerned with period. It depends upon the passage of time. It is also referred to as non-variable cost or stand by cost, capacity cost or period cost. It tends to be unaffected by variations in output. These costs provide conditions for production rather than costs of production. They are created by contractual obligations and managerial decisions. Rent of premises, taxes and insurance, staff salaries constitute fixed cost. Variable cost This cost varies according to the output. In other words, it is a cost which changes according to the changes in output. It tends to vary in direct proportion to output. If the output is decreased, variable cost also will decrease. It is concerned with output or product. Therefore, it is called as a product cost. If the output is doubled, variable cost will also be doubled. For example, direct material, direct labor, direct expenses and variable overheads. It is shown in the diagram below.

    Semi-variable cost This is also referred to as semi-fixed or partly variable cost. It remains constant up to a certain level and registers change afterwards. These costs vary in some degree with volume but not in direct or same proportion. Such costs are fixed only in relation to specified constant conditions. For example, repairs and maintenance of machinery, telephone charges, supervision professional tax, etc.

    You might also like