1.2 Other ways of classifying costs
In addition to the principal classifications of variable and fixed, we can identify several other classifications for costs, as outlined below.
| By nature | This would include material or labour. Classifying costs by nature can also be termed subjective classification. |
| By purpose | Direct or indirect. We will explore this further in this course. Classifying costs by purpose can also be termed objective classification. |
| By function | For example, production, administration or selling. |
| By how it behaves | Fixed, variable, semi-variable, stepped fixed. |
| Normal/abnormal | This considers whether unusual events have influenced costs. |
| Controllable/non-controllable | This is concerned with whether the manager, within whose area of the organisation a cost is incurred, can influence the cost. |
| Relevant/irrelevant | This distinction is used in decision making. Relevant costs are considered when making a decision, as they have a direct impact on the decision outcome. Irrelevant costs do not have an impact on the decision and are therefore not taken into consideration. |