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i. Production costs
These are costs incurred on the factory floor to produce a product e.g. materials, repairs &
maintenance on machinery, poor etc.
ii. Administration costs
These are costs incurred on policy formulation and ensuring that the policies are followed .e.g.
manager's salaries, office rent etc.
iii. Selling and distribution costs
These are costs incurred to ensure that the firm's products reach the consumer e.g. advertising
expenses, depreciation of delivery vans etc.
iv. Research and development costs
These are costs incurred in improving existing products or methods of production and in
discovering new products.
Behavioral classification
Costs will be classified according to nature or behavior in relationship to change in the levels of
production such as:
i. Variable costs
These are costs which tend to vary directly with the levels of out put. e.g. cost of raw materials,
direct expenses etc.
ii. Fixed costs
These are costs whose total will tend to remain fixed irrespective of changes in out put. e.g.
Salaries, rent etc.
iii. Semi fixed costs
These are costs which be fixed up to certain output levels and thereafter increase and get fixed
at higher levels. These cost are partially fixed and partially variable e.g. partially variable e.g.
telephone costs electrical costs etc.
marto answered the question on February 26, 2019 at 08:58
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