CAS-1: Classification of Cost

• Why every cost is sorted, and why one bill can carry several labels (§5.1)
• Sorting by nature, traceability, function and behaviour (§6.1–6.4)
• Prime cost, worked out for one school uniform (§4.26)

Chapters

1. A shoebox full of bills · Sort every bill into material, people or other expenses (§§5.1, 6.1)
2. Can you pin it to the order? · Direct and indirect costs, and the prime cost of one uniform (§§6.2, 4.26)
3. Which job does the money do? · Making, running the office, selling and delivering (§6.3)
4. What happens when the order doubles? · Fixed, variable and semi-variable costs (§6.4)
5. One bill, many labels · The same cost seen through each way of sorting (§§5.1, 6.1–6.5)
6. Spot the mistakes on the cost sheet · Use everything you sorted today (§§6.1–6.4)

Key terms

• Classification by nature (§6.1): Sorting costs by what they are: material (things bought), employee cost (people paid) and expenses (everything else, such as rent, power and outside services).
• Direct and indirect cost (§§6.2, 4.26): A direct cost can be traced straight to the thing you are costing (here, the school order). An indirect cost is shared and has to be divided. All the direct costs added together are the prime cost.
• Classification by function (§6.3): Sorting costs by the job they do: production (making), administration (running the business), selling, distribution (delivering), and research and development (creating something new).
• Fixed, variable and semi-variable cost (§6.4): Fixed: the total stays the same whatever you make (rent). Variable: the total moves with output (thread). Semi-variable: partly fixed, partly moving (an electricity bill with a fixed meter charge plus units used).
• One cost, several classifications (§5.1): The same cost can be classified in several ways at once, depending on what you want to know. CAS-1 also sorts costs by the production process (for example, batch or job costs) and by whether they are controllable, normal or relevant for a decision.