Costs and expenses are two accounting concepts that are both interrelated and significantly different, in a general sense, costs and expenses refer to the enterprise in the production and operation of a variety of capital expenditure. The cost of the enterprise, in terms of its economic substance, is the value of the product value composition of c + v two parts of the value of the equivalent, expressed in monetary terms, that is, the enterprise in the product operation of the sum of the funds spent.
Classification
I. Manufacturing costs and period expenses. Costs and expenses can be divided into two main categories.
Manufacturing costs
Meaning: refers to the costs apportioned by product and directly related to the production of products
Constituent items: direct materials, direct wages, other direct expenditures and manufacturing costs
Period expenses
Meaning: refers to the various kinds of expenses incurred during a certain accounting period that are not directly related to production and operation, or have little relation to them Expenses
Component items: administrative expenses, financial expenses and selling expenses
Two, fixed costs and variable costs. According to the habit of costs, costs can be divided into variable costs and fixed costs.
Variable costs
Meaning: costs that change with changes in production
Example: direct materials in the cost of a product change in proportion to changes in production
Fixed costs
Meaning: costs that do not change with changes in production
Example: investment in fixed assets such as factory buildings Costs incurred are fixed in amount and do not change due to changes in the quantity produced
III. Total Costs and Unit Costs. On the specifics of the total cost and unit cost
Total cost
meaning: is the enterprise in a certain period of time, the production of all the products of the sum of the cost
Unit cost
meaning: is a company in a certain period of time, the average cost of each product
The relationship between the two: total cost = unit cost × number of products