This document defines and describes the different types of costs that a business incurs: fixed costs that must be paid regardless of production levels, such as rent and insurance; variable costs that fluctuate based on production volume, like raw materials and wages; direct costs that are involved in the production process itself like materials and labor; and indirect costs that are overhead expenses not directly involved in production, such as administrative salaries, rent, and utilities.

1. UNIVERSITY OF THE ARMED FORCES
BUSINESS MANAGEMENT
“Types of Costs”
DAYANA CRISTINA TAMAYO

2. COSTS
THESE ARE THE MONETARY AMOUNTS THAT A BUSINESS SHOULD PAY BY
USING CERTAIN RESOURCES SO THAT IT WORKS
TYPESOFCOSTS
FIXED
VARIABLE
DIRECT
INDIRECT

3. THESE ARE PAYMENTS THAT A BUSINESS MUST PAY DESPITE IT PRODUCES
OR NOT, SELLS OR NOT ANY PRODUCT
FIXED COSTS
FIXED
COSTS
rent
salaries
insuranc
e
loans
utilitie
s

4. VARIABLE COSTS
THESE COSTS CAN VARY ACCORDING THE PRODUCTION OF A PRODUCT OR
SERVICE, A HIGHER AMOUNT OF PRODUCTION, GREATER PAYMENT
VARIABLE COSTS
RAW MATERIALS
PARTS AND
COMPONENTS
EMPLOYEE WAGES

5. DIRECT COSTS
THESE ARE COSTS OF A BUSINESS THAT INVOLVE IN THE PROCESS OF
PRODUCTION FOR GOODS AND LABOUR FOR SERVICES
DIRECT COSTS
RAW
MATERIALS
COMPONENT
S
LABOUR

6. INDIRECT COSTS
THESE ARE OVERHEADS AND ADMINISTRATIVE COSTS OF A BUSINESS THAT
NOT INVOLVE IN THE PROCESS OF PRODUCTION
INDIRECT
COSTS
salaries of all
employees
advertising
marketing
postage
rent and
utilities