Discussion:
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.