Copyright

Ch 2: Cost Types

About This Chapter

Learn about various cost types by reviewing our lively lessons. You will have the opportunity to go over cost formulas and classifications to gain a deeper understanding of this introductory accounting topic.

Cost Types - Chapter Summary and Learning Objectives

What is the significance of various cost types for accounting purposes? The lessons in this chapter will introduce you to formulas and use examples to help you understand why businesses need to analyze and predict costs. You will take a close look at cost structures and what each type reflects and have the opportunity to test yourself on these topics using the self-assessment quizzes. By reviewing these lessons, you'll learn:

  • How different cost classifications are used
  • What types of costs businesses should analyze
  • What fixed costs and variable costs are
  • What opportunity cost is and how to calculate it
  • Why sunk costs and implicit costs are evaluated

Lesson Objective
Comparing Cost Classifications Identify general cost classifications.
Cost Behavior: Definition & Pattern Analysis Relate what types of costs need to be looked at to analyze cost behavior.
Cost Classification: Predicting Behavior & Decision-Making Study the use of cost classifications to predict cost behavior.
Fixed Costs: Definition, Formula & Examples Apply the formula for fixed costs.
Variable Cost: Definition, Formula & Example Understand the formula for variable cost.
Opportunity Cost: Definition & Real World Examples Define opportunity cost and review examples.
How to Calculate Opportunity Cost Review the formula used to calculate opportunity cost.
Sunk Costs: Definition & Examples Explain what sunk costs are and how they are evaluated.
Implicit Costs: Definition & Examples Explore implicit and explicit costs.
Contribution Margin vs. Traditional Income Statements Discover the functions and differences of contribution margin and traditional income statements.

10 Lessons in Chapter 2: Cost Types
Test your knowledge with a 30-question chapter practice test
Comparing Cost Classifications

1. Comparing Cost Classifications

In this lesson, we'll learn all about costs, including how many of a company's costs are broken up and classified. Some specific costs we will explore are fixed, variable, mixed, direct, indirect, production, period, opportunity, and sunk.

Cost Behavior: Definition & Pattern Analysis

2. Cost Behavior: Definition & Pattern Analysis

In this lesson, we will look at cost behavior. We will also explain the three types of cost that a business needs to analyze when understanding cost behavior. The lesson will then conclude with a summary and a quiz.

Cost Classification: Predicting Behavior & Decision-Making

3. Cost Classification: Predicting Behavior & Decision-Making

Companies incur costs to manufacture a product. Classifying these costs and understanding their behavior helps management understand their company's cost structure.

Fixed Costs: Definition, Formula & Examples

4. 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

5. 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.

Opportunity Cost: Definition & Real World Examples

6. Opportunity Cost: Definition & Real World Examples

Learn the most important concept of economics through the use of real-world scenarios that highlight both the benefits and the costs of decisions. Opportunity cost is a simple yet powerful principle that reveals how to make the best economic decisions possible, and it explains why people make the choices they do.

How to Calculate Opportunity Cost

7. How to Calculate Opportunity Cost

Learn the formula that reveals the economic value in any major choice between two possibilities. Every choice involves tradeoffs, and opportunity cost shows you how to measure these tradeoffs.

Sunk Costs: Definition & Examples

8. 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.

Implicit Costs: Definition & Examples

9. Implicit Costs: Definition & Examples

Not all of the costs a business must consider can be calculated and tracked on a monthly basis. This lesson introduces the concept of implicit costs, including examples and how they differ from explicit costs.

Contribution Margin vs. Traditional Income Statements

10. Contribution Margin vs. Traditional Income Statements

While practically every company has need of income statements, different companies prefer different styles. In this lesson, we'll learn about both contribution margin income statements and traditional income statements.

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

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Support