Sample Term Paper
Costs can be categorized on several other basis as well. These include:
- Variable and Fixed costs – Variable costs are those that vary proportionately with some measure of business activity while fixed costs remain constant over a wide range of activity or over a given period. For example, cost of raw material required in production is a variable cost while the rent on factory building is a fixed cost.
- Controllable and Uncontrollable costs – A controllable cost is one that can be regulated by a manger over a given time period while an uncontrollable cost is one which is beyond the authority or influence of a manager.
- Relevant and Irrelevant cost – “A relevant cost is a future expected cost that will differ depending on the alternative selected in a specific situation” (Helmkamp, 1990, p. 53). An irrelevant cost is one that is the same for all alternatives. For example if the cost of direct material used is different for two machines, one of which has to be bought, then direct material cost is a relevant cost. If both machines use up the same amount of direct material, then it is an irrelevant cost.
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