Costs Types

Direct costs are those costs that cann directly to a product line or product, or a source of revenue, or business unit or be attributed to business. An example of direct cost is the cost of the tires on a new car.

Indirect costs are very different and can not connect to a specific quantity of the product or activity. The cost of labor or supply of a vehicle manufacturer is certainly a cost, but not to connect any vehicle. Each company must develop a method of allocating indirect costs to different products, sources of revenue, business units, etc. Most allocation methods of perfection, and usually end up being arbitrary to one degree or another. Managers and accounts should always use an eye on the allocation method for indirect costs and bear the cost figures by these methods with a grain of salt.

Fixed costs are costs that remain the same in a relatively wide range of sales or production. They are like a millstone around the neck of the company and the company has its product at a profit sufficient to at least break-even sale.

Variable costs may increase or decrease in proportion to changes in sales or production. Variable costs vary proportionately with changes in production /

Relevant costs are essentially future costs that could be made, depending on what takes the strategic direction of a company. If a car manufacturer decides to increase production, but increases the cost of the tire, the costs must be considered.

Irrelevant costs are those that must be taken into account when deciding on future action. These are costs you can to make the wrong decision. The corresponding cost of future costs, the costs are relevant costs incurred in the past. The money went.