What is meant by Cost object?
Cost object is anything in relation to which user of cost information wants to measure cost. It can be a product or collection of products or even a unit of product. It can be an activity. It can be a cost center i.e. a department responsible to incur cost. It can even be an instance […]
What is Cost classification and in how many ways can we classify cost?
Cost classification is a simple process in which we group or categorize costs on the basis of common characteristics. Grouping costs on the basis of their nature, form, source or any other attribution makes it really easy to understand their effects and ultimately to take decisions about costs and beyond any shadow of doubt classifying […]
Is depreciation expense a fixed cost or a variable cost?
Let’s revisit the terms Fixed cost and Variable cost and then we will discuss where depreciation cost/expense really fits. Fixed costs are such costs that do not change with the change in activity level (e.g. units produced) with in the relevant range. Where relevant range can be defined in terms of time or activity level. […]
Can direct costs be fixed and indirect costs be variable costs?
Classifying costs as direct or indirect cost is one way of cost classification whereas classifying costs on the basis of their behaviour as fixed or variable costs is just another way of classification of costs. Both classifications are separate and must not be confused together. The cost that can be traced back to a product […]
What is a non-linear variable cost?
Variable costs are such costs that change with the change in business activity level. For example if production level changes then some costs of production will change as well. This change can either be in the same direction (direct relationship) i.e. if activity increases then cost increases as well OR it can be in the […]
