Cost categories

Published on January 31, 2018   25 min
Hello everyone, I would like to welcome you to this HSTalks lecture series on "Managerial Accounting". My name is Alexander Himme, and I'm an Assistant Professor for Managerial Accounting at the Kuhne Logistics University in Hamburg, Germany. In the second module, we will talk about different types of costs.
The distinction of different cost categories is very important, and constitutes a fundamental basis for the following modules. For example, distinguishing different types of cost is relevant for determining the unit costs of product or a service. A topic we cover in module number three. It is also a basic prerequisite for understanding cost-volume profit analysis, a topic we cover in module six, or budgeting which we'll cover in module number nine. Let's have an overview of how costs are typically distinguished.
In the following, we will then discuss each category in detail. The first category is based on the criterion if cost can be directly assigned to a cost object. Based on this question, we will distinguish between so-called direct and indirect costs. The second category refers to the question whether the incurred costs are related to the production activities or not. Based on this question, you will distinguish between so-called product and period costs. The third and last category is linked to the question if costs vary with production output or not. Here, you will distinguish between variable and fixed costs.