cost classification

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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.

Subjects: Accounting.

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