CHECKLIST
Cost classification
The criteria for separating cost from expense, fixed from variable and direct from indirect, and using that to decide.
What's inside
Classifying costs is not accounting bureaucracy: it is what lets you know how much each product actually leaves behind, and what happens to the result when volume changes. The same account can be classified several ways, depending on the question. Use this list to review your structure, one criterion at a time.
- Cost or expense4
- Fixed, variable and semi-variable4
- Direct or indirect3
- Allocate with care3
- Contribution margin3
- For whom
- Cost analysts, controllers and finance managers at industrial, retail and services companies
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