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. […]
Is ‘Cost of goods sold’ a Product cost or a Period cost?
Before we discuss under what heading should we classify cost of goods sold, let’s first of all clear out our minds for the terms inventoriable costs and period costs with a quick review. You can the answer on difference between period costs and product costs in good detail here. Inventoriable costs (Product cost) or Product […]
What is the difference between Product cost and Period cost?
Product costs or Inventoriable costs are all such costs that form part of the inventory.These are basically such costs that relates directly to the products and are incurred to produce such products and also include the costs that are incurred to bring these products into saleable condition (or simply present location and condition). Examples are […]
What are different types of standards under standard costing?
Standard in simple words is a measure of what is expected to take place under the current or anticipated circumstances. Another way of defining standard is that it is something that is predetermined or planned and management wishes that actual results equate to standards. Standards are one of important quantitative tools in the hand of […]
Does Standard costing means costing based on cost accounting standards like financial accounting standards?
Standard costing does not mean cost accounting using uniform cost accounting standards similar to financial accounting standards. The main purpose of financial accounting standards is to have such set of financial statements for every entity that is comparable with other entity’s financial statements and also to have uniform basis of accounting for different transactions that […]
What is Normal costing?
Right at the very start of cost accounting we understand that decision making is one of the crucial and an ongoing process in every organization. Managers have to decide about many things all the time and for this they need relevant and reliable information or to be specific complete information. This is where cost accounting […]
What is the difference between Waste, Scrap, Spoil and Defect?
Waste: This is a loss connected with raw material or inputs to the production process and usually means to refer that input has been lost due to any reason either because of its nature of the material itself, nature of the process or some other conditions. Sometimes such output that does not have any sales […]
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 […]
