Costs can be categorized in the following ways:
- Actual vs. budgeted cost
- Full cost vs. direct cost
- Fixed vs. variable vs. mixed costs
- Relevant vs. irrelevant costs
- Product vs. period
- Direct vs. indirect
Discuss the following questions:
- Why is it important for a company to know the categorization of each cost?
- How can this information be used in decision making?
- Provide an example of each of the cost categorizations above.