Different types of cost concept pdf

The following points highlight the top thirteen types of cost in cost concept analysis. A managerial economists concept of cost does not necessarily coincide with that of accountant. Distinction between the sunk cost and incremental cost. An important first step in studying management accounting is to gain an understanding of the various types of costs incurred by organizations. Types of costs cost classifications costs can be classified into different categories for different purposes. Directtraceable costs and indirectuntraceable costs. On the basis of nature of costs fixed cost it is the cost of fixed inputs used in production. These costs do not vary with the change in volume of production. Usually, costs are classified according to their nature, viz. An identical cost figure may be classified in various ways.

Fixed costs do not vary with output, while variable costs do. Pdf on aug 6, 2018, ebele stella nwokoye and others published chapter five theory of costs find, read and. Variable cost it is the cost of variable inputs used in production. In order to understand the general concept of costs, it is important to know the following types of costs. There are widely recognised cost concepts but understood and applied. The two basic types of costs incurred by businesses are fixed and variable. Opportunity cost refers to the loss of earnings due to opportunities foregone due to scarcity of resources. There are manufacturing costs and nonmanufacturing costs, direct and indirect costs, product and period costs, controllable and uncontrollable costs, fixed and variable, etc. A managerial economist must have a clear understanding of the different cost concepts for clear business thinking and proper application. Incremental costs will be different in the case of different. Types of cost classifications classification by behaviour classification by traceability assignment to a cost object classification by controllability classification by relevance avoidable x unavoidable. The several alternative bases of classifying cost and the relevance of each for different kinds of problems are to be studied.

Management accountants need to understand cost concepts because they are vital in many areas of planning, control, and decisionmaking. Cost accounting aids in decisionmaking by helping a companys management evaluate its costs. These costs vary with the change in volume of production. A list and definition of different types of economic costs fixed, variable, total, marginal, sunk, accounting, opportunity cost. Cost and costing techniques in managerial economics informatics. Cost terms, concepts and classifications bangladesh open. Comparison of cost between different periods, products, departments or. These are the basic types of costs as they are used in different accounting systems.