Introduction to Classification according to functions
Classification according to functions is described as follow:
i. Production Costs:-
All costs acquired for production of goods are termed as production costs.
ii. Administrative Costs:-
Costs acquired for administration are termed as administrative costs. Instances of these costs are printing and stationery, office salaries, office rent, office telephone, office insurance etc.
iii. Selling and Distribution Costs:-
All costs acquired for procuring an order are termed as selling costs when all costs acquired for execution of order are distribution costs. Market research expenses, staff salary, sales promotion, advertising, sales expenses are some of the instances of selling costs. Transportation expenses acquired on sales, warehouse rent etc are instances of distribution costs.
iv. Research and Development Costs:-
In the current days, research and development has become one of the significant functions of a business organization. Expenditure acquired for this function can be categorized as Research and Development Costs.
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