Cost Of Cost Management Accounting

1623 Words Mar 29th, 2015 7 Pages
TASK 1
Name- Sonia Sharma
Student ID- 20150076
Unit- 26367

COST MANAGEMENT ACCOUNTING
ANSWER 1.1
a) DIRECT COSTS:- A direct cost is defined as the price that can be directly applied to production of goods. The direct cost classifies direct material, direct labour and manufacturing overheads. The direct cost is related to labour, raw material and expenses related to the production of goods. Direct cost is simply as the cost that is applied directly to the product. For example- wages of full time and part time staff.

b) INDIRECT COSTS:- Indirect cost can be defined as the cost which cannot be directly applied to the product. In simple words any cost apart from direct material, direct labour and manufacturing overheads is considered as indirect cost. For example- insurance of company building, wages of cleaners working in the company premises etc.

c) FIXED COSTS:- A fixed cost is referred to a cost which doesn’t changes with circumstances. If there is a fixed cost of any product or service one has to pay the cost. For example, the rent of the house is fixed that has to be paid every week, no changes are acceptable. For example- salary of full time staff.

d) VARIABLE COSTS:- A variable cost is a changing cost. In case of any changes the cost of the product changes. For example, the cost paid to a casual worker may vary. More hours done by the worker will pay him well…
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