Types of costs

The cost term is used in a general way in the administrative , accounting and economic areas mainly. This concept represents a value of monetary type that presents a product or service according to the economic contributions presented for the creation of the same based on the only production process, that is, there are no additional values ​​of the same such as surplus value. or added value. Only the material, the labor and the initial investment for this purpose are taken into account for the calculation.

In other words, the cost represents the monetary investment that is used for the development of a product or service that will be put up for sale in the target market established in the business plan.

In accounting terms, the calculation to define the cost of a good or service is based on the sum of the raw material represented in economic value, use of the building and machinery necessary for production, as well as the value represented in wages of the workforce that has been required.

Types of costs by area where it is consumed

Production costs

These represent the total value of what was required in monetary terms to carry out the production process by transforming the material into a final product that will be used as a product or input as the case may be. According to the particular nature of this, they are divided into the following cases: raw material costs, labor costs and indirect manufacturing costs.

Distribution or sale costs

They are those that are determined in accounting for all that monetary resource that is destined for the purpose of delivering the determined product to the point of sale defined in the marketing and/or sale plan. That is, advertising and promotion expenses are taken into account, and some commissions generated by sales as an incentive to boost sales.


Administrative costs

The monetary resource that represents the investment is stipulated in an accounting manner so that the functions of the administration of the company from the organizational point of view are carried out with good terms. It takes into account the expenses destined for stationery and other office supplies, that is, everything that facilitates the management of the company in administrative terms.

Financial costs

They are those resources that are taken into account in accounting in relation to the financial resources that are foreign to the organization and that only seek that the same company has liquidity and economic or capital solvency for its proper functioning.

Graphs with different values

Types of costs for identification with an activity

direct costs

Are those amounts that are involved in the direct production of products that will be used as inputs or products for sale. That is to say, they are those amounts that intervene in the acquisition of raw material for its elaboration as well as other accounting aspects. The modification of one or more prices directly affects the direct final cost of the good in question.

Fishermen preparing their nets

Indirect costs

They are those that are taken into account for the monitoring of the company’s operations and do not have a direct impact on the final cost of the product, but on the process of the operation, for example, when there is a depreciation in the machinery that is used for the production of the good.

Machinery in the process of a carpet

Types of costs by the time in which they are calculated

Historical or actual costs

Are those costs that accounting are obtained when the product has already been manufactured. It is shown in the financial statements under a time perspective that can be monthly, annual or five years. Hence, it is presented as a historical and statistical reference for analysis and projections.

new green sports shoe

Default costs

This type of accounting data is defined in different processes of the production stage for analysis. This can occur before, during and after said manufacturing process. These costs have the following classification: estimated costs and standard costs.

The purpose of having these data is to be able to develop a production budget or of any other nature in order to determine its viability, avoiding setbacks and/or making the pertinent decisions in the production area.

production line of a factory

Types of costs by the time they are charged to income

product costs

Accountingly, they represent those costs that are directly allocated to the product or finished product for sale or offer.

automobile assembly line

period costs

This is determined by establishing a specific time period to determine the amount that was assigned for the company’s operating purposes and can be presented in daily, weekly, monthly or annual times.

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Types of costs for the control of an expense

Controllable costs

Costs are allocated in the operations of a company based on approved budgets, the person responsible for controlling these expenses precisely defines the controllable costs under a line of authority granted by the company itself.

Coins from different countries with calculator

Uncontrollable costs

The opposite effect of the previous case arises. There is no authority that assumes the costs of an operation or of any other nature within the company.

Person with no money in his pockets

Types of Behavioral Costs

Fixed costs

They represent the costs that are required to maintain a company in optimal operations and these financial or capital resources are allocated in periods of time established by the shareholders of the same company.

financial balance

Variable costs

They are estimated through the behavior of the volume of operations that a company carries out in its organizational activity.

Rising graph lounge

mixed costs

It is an accounting combination of the representation of some fixed and variable expenses.

Graph with diversity of values ​​in dollarsTypes of Costs for Decision Making

Relevant costs

They are the costs that during a budget analysis can be eliminated without directly affecting the operations of the same company, maintaining a result of optimization of capital and financial resources.

Variety of euros with arrows

Irrelevant costs

The opposite happens in this case, here the costs will be maintained regardless of the behavior that the company is developing.

Money and feathers with red arrow

Types of costs by type of sacrifice

Out-of-pocket costs

The outflow of money that is destined for the different purposes in which the activities of the company itself must be budgeted is represented in accounting.

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