Cost Classifications Flashcards
What are the two main classifications of costs?
Fixed Cost and Variable Cost
Fixed costs do not change with the level of production, while variable costs do.
What is a Fixed Cost?
A cost that remains constant regardless of the level of production or activity.
Examples include rent, salaries, and insurance.
What is a Variable Cost?
A cost that varies directly with the level of production or activity.
Examples include raw materials and direct labor.
What is a Direct Cost?
A cost that can be directly traced to a specific cost object.
Examples include direct material and direct labor.
What is an Indirect Cost?
A cost that cannot be directly traced to a specific cost object.
Examples include maintenance costs for multiple departments.
What type of costs are traceable to a cost object?
Direct Costs
These costs are specifically associated with a particular product or service.
What type of costs are not traceable to a cost object?
Indirect Costs
These costs are incurred for multiple cost objects and cannot be directly linked to one.
Fill in the blank: Direct material and direct labor are examples of _______.
Direct Costs
Fill in the blank: Maintenance cost for multiple departments is an example of _______.
Indirect Costs
