Division of costs to various categories

Costs can be divided into different categories according to their drivers or behavior. The main reason for the costs breakdown is their understanding and subsequent optimization / reduction.

According to traceability to cost object (most often product or service):

• direct costs
  • direct material costs
  • direct labor costs
  • direct expenses
• indirect costs (overheads)
  • production indirect costs (production overheads)
    • production indirect material costs (material overheads)
    • production indirect labor costs (labor overheads)
    • production indirect expenses
  • non-production indirect costs (overheads)
    • administrative indirect costs (administrative overheads)
    • selling indirect costs (selling overheads)
    • distribution indirect costs (distribution overheads)

According to function:

• production (manufacturing) costs
• non-production costs

According to relationship with the level of production:

• fixed costs – specific type are stepped costs
• variable costs
• semi-variable costs or semi-fixed costs

According to measurement basis:

• historical cost
• standard cost
• estimated cost

According to cost source:

• external (primary) costs
• internal (secondary) costs

According to controllability:

• controllable (relevant) costs
• uncontrollable (irrelevant) costs – specific type are sunk costs

According to irreversibility:

• avoidable costs
• unavoidable costs – specific type are shut-down costs

According to actual existence:

• explicit costs
• implicit costs