ACTG 1P11 Lecture Notes - Indirect Costs, Sunk Costs, Fixed Cost

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Four common ways in which costs are classified: D. behaviour of the cost traceability to a department, process or activity relevance in decision making function of the cost in the organization: costs by behaviour, variable costs increase or decrease as the level of activity increases/decreases. Direct labour is a variable cost that varies with the level of labour hours, which can then be related to the number of units produced. Vc per unit remains the same as # of units increase or decrease: fixed costs remain constant as the level of activity increases/decreases. Building rent is a fixed cost that doesn"t vary with the level of production. Always relevant to the business decision: costs by function, manufacturing or product costs those associated with the production of goods; those assigned to goods produced. Direct materials (dm): materials directly and easily traceable to the end product. Direct labour (dl): the hands on labor in the production process.

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