Cost classification
Cost classification is the practice of labelling the same cost in multiple ways — by traceability, behaviour, function, or controllability — each label answering a different management question.
Also known asclassifying costs
See it move
A tree diagram branches from a single root labelled 'One cost' into four classification dimensions. By traceability, a cost is either direct or indirect; by behaviour, it is fixed, variable, or mixed; by function, it is a product cost or a period cost; and by controllability, it is either within or outside a manager's authority. The same physical cost can carry a different label under each dimension depending on the management question being asked.
Check yourself
A factory supervisor's salary at a ceramics plant is simultaneously described as indirect (relative to individual units), fixed (relative to output volume), a product cost (relative to inventory valuation), and controllable (by the plant manager). A first-year student finds this contradictory. Which explanation is correct?