Page 6 - Cost Accounting - Ready Reckoner

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On the basis of behaviour:

 Costs are classified as fixed cost, variable cost and semi-variable cost.
 Fixed cost remains constant at all volumes of production.

 Variable cost varies with volume of output. All direct costs are variable cost.

 Semi variable costs are partly fixed and partly variable.
 Fixed cost is also termed as Period cost.

 Variable cost is product cost.

Other terms used in Costing:

Opportunity Cost: It is the value of alternative fore gone because of a better option.

Sunk Cost: Sunk cost is historic cost irrelevant for decision making.

Imputed Cost: Imputed cost is notional cost which do not involve any cash outlay.

Marginal Cost: The sum of all variable costs is called marginal cost.