Functional classification of costs, Cost Accounting

Functional Classification of Costs

Beneath this classification, costs are classified according to the function they execute in an organization.  Costs can functionally be classified like:

a) Production Costs: Are all the costs incurred in production of units throughout a time period as like an example of raw material costs, and production overheads and direct labour costs.

b) Administration Costs:  These are all costs incurred in making sure the smooth running of the organization so like to facilitate the production and sale of services and goods.  These involve: salaries for the managers, salaries for support staff like accountants, and secretaries and clerks

c) Distribution and Selling Costs:  These are costs such are incurred to enable the delivery of products and services to the real markets and complete or promote a sale. These costs include: saleswoman salaries, salesmen commission, advertising costs, depreciation on motor vehicles utilized through salesmen, the cost of fuel utilized through vehicles utilized for distribution reasons etc.

d) Other functional classifications

Posted Date: 2/5/2013 3:10:53 AM | Location : United States

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