The management accountant will use cost information for two main reasons.
1 to ascertain the cost of a product. This information is used to value stock which is required for external reporting .
2 to assist management in the decision-making process.
Depending on the cost objective the costs will be classified into a number of categories.
(a) By nature of resource
(i) Materials
(ii) Labour
(iii) Other Expenses
(b) By type of cost
(i) Direct Costs
(ii) Indirect Costs – Overheads
(c) By function
Production, Administration, Selling and Distribution
(d) By the behaviour of costs
(i) Fixed or Periodic Costs
(ii) Variable Costs
(iii) Semi-fixed, or Semi-variable Costs
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