Cost Classifications of Garments

Cost Classifications:

Costs can be classified: By nature or elements or analytics, by functions, as direct or indirect cost, by variability, controllability, normality, time, according to planning and control and for managerial costs.

By Nature, Elements or Analytics
Costs can be classified by Nature, Elements or Analytical classification: This includes Material, labour and expenses.

By Functions
Cost can be classified by functions. Either by: Manufacturing and Production Cost, or by Commercial Cost. This includes: (1) Administrative Cost. (2) Selling and Distribution Cost and (3) Research and Development Cost.

As Direct or Indirect Cost
Costs can be classified as: Direct cost, and Indirect cost.

By Variability
Costs can be classified by variability, such as: Fixed or Period Cost, Variable or Product Cost and Semi-variability Cost.

By Controllability
Costs can be classified by controllability. These are: Controllable costs and Uncontrollable costs.

By Normality
Costs can be classified by normality. These are: Normal costs and Abnormal costs.

By Time
Costs can be classified on the basis of time. These are: Historical costs and predetermined costs.

According to Planning and Control
Costs can be classified according to planning and control. This includes: Budgeted costs and Standard costs.

For Managerial Costs
Costs can be classified for managerial purposes. This includes: Marginal costs, opportunity costs, replacement costs, avoidable and unavoidable cost.
Cost is a measurement, in monetary terms, of the amount of resources used for some purpose. According to the American Accounting Association - Cost is the foregoing, in monetary terms, incurred or potentially to be incurred in the realisation of the objective of management which may be manufacturing of a product or rendering of services.
Fixed or period costs are those costs which remain fixed in total amount, with increase or decrease in the volume of output for a given point of time.
Fixed Cost per unit decreases as production increases, and increases as production declines.
Variable or product costs are those costs, which vary in total in direct proportion to the volume of output. These costs per unit remain relatively constant with changes in production.
Semi-Variable costs are the costs which are partly fixed and partly variable. Marginal cost is the total of variable costs that is prime cost plus variable overhead. Extra cost incurred to manufacture one extra unit of production.

Average Cost = Total Cost / Number of Units Produced