Cost Classification.

Q14. How are cost classified?
Ans. Classification of cost:

  1. Fixed Cost: Cost which depend upon time and is unrelated to production is called fixed cost. It is also called period cost. For example rent, salary etc.
  2.  Variable Cost: Cost which changes in the same proportion as changes in the proportion of output is called variable cost. It is also called as product cost. For example material, labor etc.
  3. Semi Variable Cost: Cost Which changes as there is change in level of activity but not in same proportion is called semi variable cost. For example telephone and electricity expense.
  4. Controllable Cost: Cost which with can be influenced by the action of a given member of an undertaking of which can be controlled is called controllable cost. For example telephone expense.
  5. Uncontrollable Cost: Cost which with cannot be influenced by the action of a given member of an undertaking or which cannot be controlled is called uncontrollable cost. For example rent.
  6. Normal Cost: A cost which is normally incurred at a given level of output in the conditions in which that level of output is normally attained is called normal cost.
  7.  Abnormal Cost: A cost which is not normally incurred at a given level of output in the conditions in which that level of output is normally attained is called abnormal cost. For example excess wastage.
  8. Direct Cost: Cost which can be specifically relates to a product or job or cost center is called direct cost.
  9. Indirect Cost: Cost which cannot be charged directly to a product or job or cost center is called indirect cost.

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