Introduction to Basic Cost Concepts

Question:

Generally when the term “ Cost” is mentioned, it encompassed a wide ranging meanings and also that this term is being used in different situations.

So can we basically classify certain BASIC COST TERMS that are commonly used in the cost and management accounting books?

Answer:

As earlier mentioned, the term “ COST” is a wide ranging word but certain basic cost terms can be classified as follows:

·     Direct and Indirect Costs:

·     Period and Product Costs;

·     Cost Behavior in relation to volume of activity: variable,fixed and mixed cost;

·     Relevant and Irrevelant Costs;

·     Avoidable and Unavoidable Costs and

·     Sunk Costs

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