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Chapter 4

2.2 Classifying cost according to their nature

 Direct costs can be clearly identified with the cost object we are trying to cost.

The total of all direct costs is known as PRIME COST.

 Indirect costs cannot be directly attributed to a particular cost unit, although it is
clear that they have been incurred in the production of the product.

These indirect costs are often referred to as OVERHEADS.

Illustrations and further practice

Now try TYU questions 1 and 2 from Chapter 4

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