Cost : Concept , Classification and Component

Materials

Labor

Overhead

All of the above

Costs are always fixed

Expenses are always variable

Costs are incurred to generate revenue

Expenses are not related to revenue generation

Planning

Controlling

Decision making

All of the above

Costs are future benefits, while expenses are current benefits.

Costs are always higher than expenses.

Expenses are investments, while costs are not.

Costs and expenses are the same.

Function

Behavior

Other

Classification

Direct Material, Direct Labor Cost, Selling Expenses, Administration Expenses

Direct Material, Direct Labor Cost, Prime Cost, Selling Expenses

Manufacturing Overhead Cost, Conversion Cost, Selling Expenses, Administration Expenses

Direct Material, Prime Cost, Selling Expenses, Administration Expenses

Direct Material

Direct Labor

Manufacturing Overhead

Marketing Costs

Direct materials and direct labour

Direct labour and manufacturing overhead

Selling expenses and administrative costs

Prime costs

Direct materials and direct labour

Manufacturing overhead

Selling expenses

Administrative costs

materials that are used for marketing purposes

materials that are used for office supplies

materials that are used to make a product indirectly

easily traceable to the cost object

Selling Expenses

Administrative Expenses

Production Costs

Direct Costs

increase sales

increase net income

decrease sales

control costs

Sales commissions

Direct materials

Sales commissions

Office supplies

Shipping costs

Variable Cost

Fixed Cost

Mixed Cost

All of the above

Direct Cost

Indirect Cost

Fixed Cost

Variable Cost

Direct materials

Direct labor

Indirect costs

Fixed costs

Indirect labor

Advertising expenses

Director’s salary

All of the above

Direct Materials

Direct Labor

Manufacturing Overhead

All of the above

Product costs are reported in the Statement of Profit or Loss

Period costs are involved in the process of making products

Product costs include selling expenses

Period costs are reported in the Statement of Cost of Goods Manufactured