Types of cost incurred by a business and their classifications

Question 1

What are product costs?

Answer 1

Product costs are the costs that are incurred to create a product that is intended for slae to customers.
They include:
- Direct Material (DM)
- Direct Labour (DL)
- Manufacturing Overhead (MOH)

Question 2

What are Ancilliary Product Costs?

Answer 2

Good or services that differ from or enhance the main product lines of services of a business. They are a further source of revenue for a business, olongside its main revenue-generating products or services.

Question 3

What are Overheads?

Answer 3

Costs related to the day-to-day running of the business. They cannot by linked to a specific cost unit or activity, but they support the the overall activities of the business. They must be paid on an ongoig business

Question 4

What are the overhead expenses?

Answer 4

• Manufacturing
• Administration
• Marketing
• Distribution
• Research and Development
• Equipment
• Rent of Premises

Question 5

What is Labour Costs?

Answer 5

One of the biggest costs for a buiness and include employer wages and salaries, taxes, pensions, employee benefits and annual leave allowances.

Question 6

What are the Classifications of Cost?

Answer 6

• Direct Costs
• Indirect Costs
• Fixed Costs
• Variable Costs

Question 7

Direct Costs?

Answer 7

those related to produceing a product of delivering a service and include materiasl, labour and distributions. They can be linked directly to a product or service.

Question 8

Indirect Costs?

Answer 8

Cannot be linked directly to a specific product of service

Question 9

Fixed Costs?

Answer 9

Do not change, even though the production of the business changes over the short term.

Question 10

Variable Costs?