Module 2- Classification of Costs Flashcards
Controllable costs
Costs, revenues and investments that are under management control
Non-controllable costs
Costs not under direct control of a manager often controllable at company or group level
Responsibility centres
A company division, product or department under a manager’s control
Three types of responsibility centre:
- cost centre
- profit centre
- investment centre
cost centre
Part of a business that does not generate any revenue - responsibility over cost
Profit centre
Manager is responsible for both costs and revenue and therefore, profit
Investment centre
Manager has the authority to undertake capital expenditure as well as managing revenues and related costs
Direct costs
Those identified easily with a product or service
Prime cost
sum of direct material cost, direct labour cost and direct expenses
Indirect costs
Cannot be easily identified with one particular product or service
Overhead costs
Any cost which doesn’t relate to one specific product
Fixed costs
Do not change no matter how many units of an item are produced
Variable costs
Costs which change based on production
Semi-variable costs
E.g. electricity bill with a standing charge
Semi-fixed cost
Fixed charge changes at discrete activity level
