Cost Classifications – Managerial Accounting- Fixed Costs Variable Costs Direct & Indirect Costs

Cost classification will go over some of the classification methods used in managerial accounting. It is often useful to classify cost by behavior because this helps us generate projections. The two major classifications of costs by behavior are fixed costs and variable costs. Fixed costs do not increase as production increases. Rent is a good example of a fixed costs. As production increases the amount of rent stays the same. Variable costs increase with production. Direct materials is an example of a variable cost.
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