Bussiness Management

Cost refers to the monetary value of expenditures for raw materials, equipment, supplies, services, labour, products, etc. OR
Cost is the expenditure incurred in producing a product. It is an amount that is recorded as an expense in bookkeeping records. Classification of cost means, the grouping of costs according to their common characteristics.
Cost accounting differs from costing; however, both are used interchangeably. Cost accounting is a specialised branch of accounting which involves classification, recording, analysing, standardising, comparing, reporting and recommending.
There are many types according to our discussion the following are the classified types of cost:
Cost is classified according to cost element: there are three elements of cost including Material cost, Labour cost and overhead cost. Material cost is based on raw materials which are the basic material used in the production of goods, finished products or intermediate materials that are themselves feedstock for finished products. Example of raw materials including crude oil, plastic, latex, coal, iron ore, logs and many others. Labour cost involves the payment of labours the labour includes direct and indirect labours. And overhead cost which are the cost of resources used by an organization just to maintain its existence. Example payment of rent on the office space a business occupies, cost of electricity for the office lights and some office personnel wages.
Classification according to function: here we have Production cost, selling and distribution cost and administrative cost. Production costs is the cost of sequence of operations which begins with supplying materials, labour and services and ends with the primary packing of the product. Thus, it includes the cost of direct material, direct labour, direct expenses and factory overheads. Administrative cost is the cost of formulating the policy, directing the organization and controlling the...