B DB 3

This assignment has 3 parts:

Costs can be categorized in the following ways: 

• Actual vs. budgeted cost 
• Full cost vs. direct cost 
• Fixed vs. variable vs. mixed costs 
• Relevant vs. irrelevant costs 
• Product vs. period 
• Direct vs. indirect

Discuss the following questions: 

1. Why is it important for a company to know the categorization of each cost?  
2. How can this information be used in decision making? 
3. Provide an example of each of the cost categorizations above.