About This Chapter
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
|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.|
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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Other chapters within the Accounting 102: Intro to Managerial Accounting course
- Overview of Managerial Accounting
- Cost Behavior Analysis & Cost-Volume Profit
- Job-Order Costing & Process Costing
- Basics of Activity-Based Costing
- Budgeting & Standard Costs
- Reporting Systems & Structures in Accounting
- Short & Long-Term Decision-Making in Accounting
- Basics of Financial Statement Analysis
- Studying for Accounting 102