Ch 1: Cost Classifications in Accounting

About This Chapter

Open up this chapter to become better acquainted with cost classifications in accounting. These comprehensive lessons help you memorize major terms, formulas, problem-solving strategies, and concept applications, all of which can help you improve your grades or study for an exam.

Cost Classifications in Accounting - Chapter Summary

Accounting and financial professionals analyze various types of figures every day, and to do so effectively they must organize these figures into different groups. This chapter looks at that organizational method as it analyzes cost classifications in accounting. The majority of our video and article-style lessons can each be completed in 5-10 minutes. That means you can finish an entire accounting lesson while you're waiting in line or sitting on public transit. After you get through this entire chapter, you will be prepared to:

  • Describe examples of direct and indirect costs
  • Identify the differences between fixed and variable costs
  • Define mixed costs in accounting
  • Compare irrelevant and relevant costs
  • Examine the steps for calculating opportunity costs
  • Explain the formula for average total cost
  • Point out how marginal costs are determined
  • Assess the importance of period cost calculations
  • Differentiate prime costs, product costs, and unit costs
  • Summarize examples of conversion costs
  • Show how sunk costs are calculated

15 Lessons in Chapter 1: Cost Classifications in Accounting
Test your knowledge with a 30-question chapter practice test
Direct Cost: Definition, Formula & Examples

1. Direct Cost: Definition, Formula & Examples

This lesson explains direct costs. Included in the lesson is how they are calculated. You'll also have the chance to examine examples of direct costs.

What Are Indirect Costs? - Definition & Examples

2. What Are Indirect Costs? - Definition & Examples

This lesson explains what indirect costs are and how they affect a business. Examples of indirect costs and how they can vary in different businesses are given.

Fixed Costs: Definition, Formula & Examples

3. Fixed Costs: Definition, Formula & Examples

Understanding an organization's cost structure is essential for management to make appropriate investments. In this lesson, you'll learn the definition of fixed costs and why understanding fixed costs is an important part of financial management.

Variable Cost: Definition, Formula & Examples

4. Variable Cost: Definition, Formula & Examples

In this lesson, we'll be looking at variable costs, which are those costs that change directly with production. After the lesson, you can test your knowledge with a short quiz.

Mixed Costs: Definition & Examples

5. Mixed Costs: Definition & Examples

In this lesson, we'll look at mixed costs. We'll define variable costs and fixed costs, and we'll look at how the two are related to mixed costs. Afterward, you can test your knowledge with a brief quiz.

Relevant & Irrelevant Costs: Definitions & Examples

6. Relevant & Irrelevant Costs: Definitions & Examples

In this lesson, we'll look at relevant and irrelevant costs. We'lll define both types of costs and walk through some examples to help better explain the concepts. The lesson will conclude with a summary of important points and a brief quiz.

Opportunity Cost: Definition, Calculations & Examples

7. Opportunity Cost: Definition, Calculations & Examples

This lesson discusses opportunity costs, a central idea of economics. In addition to examining the general idea of opportunity costs, it also looks at the role of explicit and implicit costs to firms.

Average Total Cost: Definition & Formula

8. Average Total Cost: Definition & Formula

Knowing and understanding cost structure is an important part of budgeting, production planning, and pricing decisions. In this lesson, you'll learn the definition and calculation of average total cost.

Marginal Cost: Definition, Equation & Formula

9. Marginal Cost: Definition, Equation & Formula

Marginal cost is an important concept in business. In this lesson, you'll learn what marginal costs are and their standard formula with some illustrative examples. A short quiz follows the lesson.

Period Costs in Accounting: Definition & Examples

10. Period Costs in Accounting: Definition & Examples

In this lesson, we'll discuss the importance of accurately determining period costs. We'll also review accounting principles associated with classifying costs and examine types of period costs.

Product Costs in Accounting: Definition & Examples

11. Product Costs in Accounting: Definition & Examples

This lesson provides the definition and example of what product costs are, how they differentiate from period costs, and how they are used on a cost of goods manufactured schedule in relation to financial statements.

Prime Cost in Accounting: Definition & Formula

12. Prime Cost in Accounting: Definition & Formula

Prime costs represents the total costs directly involved in manufacturing a product. This lesson breaks down the components of prime costs, its formula, and how it is used.

Unit Cost: Definition, Formula & Calculation

13. Unit Cost: Definition, Formula & Calculation

Unit cost is a fundamental quantity used for businesses ranging in size from a pre-revenue bakery to a certain multi-national smartphone company. This lesson will show you what it is, how to calculate it, and why it is important to know.

Conversion Cost in Accounting: Definition & Examples

14. Conversion Cost in Accounting: Definition & Examples

In accounting, conversion costs are important for balance sheets and income statements. And if you cook, you are actually already familiar with these things. In this lesson, we will learn about conversion costs and practice calculating them.

Sunk Costs: Definition & Examples

15. Sunk Costs: Definition & Examples

In this lesson, sunk costs are defined and evaluated in the context of company decision making. Concepts are illustrated with examples from the construction industry and a small messenger business.

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
Not Taken
Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
Not Taken

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