Types of costs

four different types of costs

1. TYPES OF COSTS By : Aura Villa Tutor: Msc . Maricela Madrid

2. COSTS: Costs are outlays or expenses for which we get something in return. A business needs money to pay for the resources it uses and in order to pay for it, the business needs to sell enough of its goods or in other cases provide enough of its services.

3. Types of costs A business has many different costs, from paying for raw materials through to paying the rent or the electrical bill . By careful classification of these costs a business can analyze its performance and make better-informed decisions. Types of cost Variable Fixed Direct Indirect

4. To obtain an accurate costing for any product or service, a business basically needs to identify its direct costs , such as material and labour and its overheads, such as rent, and add to them any indirect costs, such as administration, which may apply to that particular product or service . 1. Direct costs: Are simple to determine and are directly incurred in the production process . They are directly connected with a business’ goods and services , such as components and raw materials. 2. Indirect costs: Are not directly incurred in the production process, this means that are harder to allocate, since they are associated more with the administration and general running of the business.

5. 3. Fixed cost : They do not change in relation how much output a business produces. Example: - Rent - business-s license - wages - insurance 4. Variable costs: These costs vary according to the production levels change or in other words the more goods or services produced the higher amounts to be paid . Example: - Raw materials - Commission paid to sales people based on how much they sell. - Labor used in the production process.