cost classification

The process of grouping expenditure according to common characteristics. Costs are initially divided into capital expenditure and revenue expenditure. In a production organization the revenue expenditure is classified sequentially to enable a product cost to build up in the order in which these costs tend to be incurred. Revenue costs would normally include:
• direct material,
• direct labour,
• direct expenses,
• manufacturing overheads,
• administration overheads,
• selling overheads,
• distribution overheads,
• research overheads.

Accounting dictionary. 2014.

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