Chapter 2: Cost Classification

Question 1

Define a cost card

Answer 1

A cost card is produced for either an individual product service or a planned level of production.

Question 2

What are the four type of costs that cost card lists?

Answer 2

• Prime cost (total of direct materials, labour and expenses)
• Marginal cost (total of direct and indirect costs)
• Absorption cost (total production cost)
• Total cost (absorption cost plus non-production cost)

Question 3

What are the three ways costs can be classified?

Answer 3

1. Element
2. Function
3. Nature