Cost Classification Bases
Costs can be classified on either more or one of the given bases as:
a) Are the costs dependent on the level of output as like variable or are the costs the similar irrespective of the level of output as like fixed?
b) Have the costs already been incurred as like sunk or are they going to be incurred in the future depending on what we choose as like incremental?
c) Are they already incurred as like historical/sunk or are the costs because of a benefit foregone for not taking a specific option as opportunity cost?
d) Are we in a place to decide not to incur the costs as like ignorable or are we bound to incur them via authorities we are subject to as like higher the government and managers as unavoidable?
e) Are the costs really incurred as like actual or are they the expected like per the expenditure guidelines set through the management as standard?
f) Can we be capable to control the costs, as an example, via varying the level of output or by creation suitable decisions as controllable costs, or are the costs beyond us since they are fixed or the decisions are made through higher authorities as uncontrollable?
g) Can we trace the exact costs incurred to the final product as direct costs or can we not, may be simply estimate that costs as indirect costs?
h) What is the function to make the costs to be incurred in the organization, is it administration, production, or selling and distribution?
i) Is the cost incurred for manufacturing purpose as production cost or for manufacturing support purpose as non-manufacturing cost?
j) How does the cost behave along with respect to changes in the output level?
- Does it stay fixed during irrespective of the output level as fixed cost,
- Does it change proportionately along with the change in output level as variable cost,
- Does it remain fixed while output is zero however increases as output increases from that point onwards as semi-variable;
- Does the cost stay fixed within specific production bands however change instantly to another fixed level once the output band changes as a stepped cost?