I.

COST CLASSIFIED AS TO RELATION TO PRODUCT

A. Manufacturing cost/product cost
 Product cost refers to the costs incurred to create a product.
a.1. Direct materials (DM)
 Represents the cost of the materials that can be identified directly with the
product at reasonable cost. For example, cost of paper in newspaper printing,
etc.
a.2. Direct Labor (DL)
 Represents the cost of the labor time spent on that product, for example cost
of the time spent by a petroleum engineer on an oil rig, etc.
a.3. Factory Overhead (FOH)
 Represents all production costs except those for direct labor and direct
materials, for example the cost of an accountant's time in an organization,
depreciation on equipment, electricity, fuel, etc.

B. Non-Manufacturing Costs / Period Costs

 A period cost is any cost that cannot be capitalized into prepaid expenses,
inventory, or fixed assets. A period cost is more closely associated with the
passage of time than with a transactional event.
b.1. Marketing or selling cost
 It is the expenditures incurred by suppliers in creating and sustaining a
demand for their products. Selling costs include ADVERTISING expenditures;
packaging and styling; salaries, commissions and travelling expenses of sales
personnel; and the cost of shops and showrooms.
b.2. General or administrative cost
 Administration costs, also known as overhead costs or fixed costs are the
costs which incur on a business or hotel solely from running.
Examples for administrative costs are taxes, rent, insurance, licensing fees,
utilities, accounting and legal teams, administrative staff, facility upkeep, etc.

II. COST CLASSIFIED AS TO VARIABILITY

A. Variable Cost
 A variable cost is a corporate expense that changes in proportion to
production output. Variable costs increase or decrease depending on a
company's production volume; they rise as production increases and fall as
production decreases.
Examples of variable costs include the costs of raw materials and packaging.
A variable cost can be contrasted with a fixed cost.
B. Fixed Costs
 Fixed costs are expenses that remain the same regardless of production
output. Whether a firm makes sales or not, it must pay its fixed costs, as these
costs are independent of output. Examples of
fixed costs are: rent, employee salaries, insurance, and office supplies.
C. Mixed Cost

 A mixed cost is an expense that has attributes of both fixed and variable
costs. In other words, it’s a cost that changes with the volume of production
like a variable cost and can’t be completely eliminated like a fixed cost.
Typical real-life Examples of mixed costs include:

1. Employee benefits: companies typically pay fixed base salaries and

variable bonuses and commissions depending on employee performance.

2. Telecommunications expense: phone companies typically charge a fixed

amount regardless of actual usage plus a variable component which
depends on usage.
3. Car rental expense: car rent expense has a certain base fare and a variable
fare which depends on actual distance travelled and time spent on the
trip.

III. COST CLASSIFIED AS TO RELATION TO MANUFACTURING DEPARTMENT

A. Direct Departmental charges

 A direct cost is a price that can be directly tied to the production of specific
goods or services. A direct cost can be traced to the cost object, which can be
a service, product, or department. 
Direct Costs Examples
Any cost that's involved in producing a good, even if it's only a portion of the
cost that's allocated to the production facility, are included as direct costs.
Some examples of direct costs are listed below:

 Direct labor
 Direct materials
 Manufacturing supplies
 Wages for the production staff
 Fuel or power consumption

B. Indirect Departmental charges

 All those expenses that are incurred in common for different projects,
products, or business activities and cannot be easily divided for individual
projects, products, or activities are called indirect costs. We also could say all
the costs that could not be allocated to direct costs are indirect costs.
IV. COST CLASSIFIED TO THEIR NATURE AS COMMON OR JOINT
A. Common Cost
 A common cost is an expense associated with operating a facility, product, or
segment that is shared between two or more departments or users. In other
words, it’s a shared expense of creating a product or providing a service that
can’t be attributed to a single department or user.

B. Joint Cost
 Joint costs are costs that are incurred from buying or producing two products
at the same time. In cost accounting terms, joint costs have the same cost
object.

V. COST CLASSIFIED AS TO RELATION TO AN ACCOUNTING PERIOD

A. Capital Expenditures
 money spent by a business or organization on acquiring or maintaining fixed
assets, such as land, buildings, and equipment.
B. Revenue Expenditures
 An amount that is expensed immediately. For example, routine repair costs
on equipment are revenue expenditures because they are charged directly to
an income statement account such as Repairs and Maintenance Expense.

VI. COST FOR PLANNING, CONTROL, AND ANALYTICAL PROCESSES.

A. Standard Cost
 A standard cost is described as a predetermined cost, an estimated
future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the
"should be" cost. Standard costs are often an integral part of a
manufacturer's annual profit plan and operating budgets.
B. Opportunity Costs
 Opportunity costs represent the potential benefits an individual, investor, or
business misses out on when choosing one alternative over another. The idea
of opportunity costs is a major concept in economics.
C. Differential Cost
 Differential cost refers to the difference between the cost of two alternative
decisions. The cost occurs when a business faces several options, and a choice
must be made by picking one option and dropping the other. When business
executives are faced with such situations, they must select the most viable
option that increases revenues. They must determine the cost of both options
and calculate the cost of picking one option over another in order to make a
sound decision. In most cases, the main influencing factors when making such
decisions are the costs and profits for each option.
D. Relevant Cost
 Relevant cost is a managerial accounting term that describes
avoidable costs that are incurred only when making specific business
 decisions. The concept of relevant cost is used to eliminate unnecessary data
that could complicate the decision-making process.
E. Out-of-pocket cost
 Out-of-pocket costs refers to expenses incurred by employees that require a
cash payment. The employer typically reimburses employees for
these costs through an expense reporting and check payment system.
Examples of out-of-pocket costs are:
The purchase of gasoline, parking, and tolls while engaged in company
business.
F. Sunk Cost
 A sunk cost refers to money that has already been spent and which cannot be
recovered. In business, the axiom that one has to "spend money to make
money" is reflected in the phenomenon of the sunk cost. A sunk cost differs
from future costs that a business may face, such as decisions about inventory
purchase costs or product pricing. Sunk costs are excluded from future
business decisions because the cost will remain the same regardless of the
outcome of a decision.
G. Controllable Cost
 Controllable costs are those costs that can be altered in the short term.
More specifically, a cost is considered to be controllable if the decision to
incur it resides with one person. If the decision instead involves a number
of individuals, then a cost is not controllable from the perspective of any
one individual. Also, if a cost is imposed on an organization by a third
party (such as taxes), this cost is not considered to be controllable.
Examples of controllable costs are: *Advertising
*Bonuses *Direct materials
*Donations *Dues and subscriptions
*Employee compensation *Office supplies
*Training

 Divine (A)
I. COST CLASSIFIED AS TO RELATION TO PRODUCT
 Ashley
II. COST CLASSIFIED AS TO VARIABILITY
 Abegail
III. COST CLASSIFIED AS TO RELATION TO MANUFACTURING DEPARTMENT
 Rosemarie
IV. COST CLASSIFIED TO THEIR NATURE AS COMMON OR JOINT
 Melanie
V. COST CLASSIFIED AS TO RELATION TO AN ACCOUNTING PERIOD
 Xander (A-C) & Marga (D-G)
VI. COST FOR PLANNING, CONTROL, AND ANALYTICAL PROCESSES.