Cost classification by function divides costs into which two categories?

Cost classification by function divides costs into which two categories?

• A. Non-production costs (admin and distribution)
• B. Direct costs
• C. Production costs (Materials, labour and expenses)
• D. Indirect costs

Answer: (C)

Costs classified by function are split into two groups: production costs and non-production costs. Production costs are the expenses tied to making goods or delivering services and include materials, direct labour, and production overheads. Non-production costs cover activities outside the production process, such as administration and distribution (selling and general overheads). The option presented illustrates production costs with examples, but the full division also includes the non-production side.

Costs classified by function are split into two groups: production costs and non-production costs. Production costs are the expenses tied to making goods or delivering services and include materials, direct labour, and production overheads. Non-production costs cover activities outside the production process, such as administration and distribution (selling and general overheads). The option presented illustrates production costs with examples, but the full division also includes the non-production side.