20. Cost Accounting Basics – Types of Costs

Try these first

1. 1.

   Define direct costs with an example.

   Hint

   Think of costs that are traceable to one specific product.

2. 2.

   What are fixed costs? Give one example.

   Hint

   Consider costs that you must pay every month.

3. 3.

   What type of costs can be directly attributed to a product?

   • Fixed Costs
   • Direct Costs
   • Indirect Costs

   Hint

   Think about what costs you can trace back directly to a product.

4. 4.

   True or False: Sunk costs can influence future business decisions.

   • True
   • False

   Hint

   Consider what sunk costs represent in terms of recovery.

5. 5.

   A furniture company spends ₹10,000 on wood to make 100 chairs and rents a factory for ₹20,000 a month. If production increases to 200 chairs, how do variable and fixed costs influence pricing?

   Hint

   Consider how total costs contribute to the cost per unit.

6. 6.

   Discuss a scenario where an entrepreneur must choose between a corporate job with a salary of ₹8 LPA and starting a business that may provide uncertain returns. Analyze the opportunity cost involved.

   Hint

   Think about the trade-offs between security and potential growth.