Question
The cost classifications for predicting cost behaviour are: Relevant and irrelevant costs Fixed and varlable costs Direct and indirect costs Product and period costs
Answer
3.8
(281 Votes)
Faith
Veteran · Tutor for 12 years
Answer
Fixed and variable costs.
Explanation
## Step1: This problem tests the understanding of various ways in which costs can be classified in the scenario of predicting cost behavior. Predicting cost behavior is significant for management decisions such as budgeting and cost control. Here we are analyzing different classifying categories of costs.## Step2: The classifications present in the options are observational descriptions, namely: Relevant and irrelevant costs refer to the influence of costs on certain business decisions, whereas irrelevant costs do not impact future decisions; Fixed and variable costs refer to the dependency on the production level, a fixed cost isn't influenced by the quantity produced whilst variable costs change with the level of output; Direct and indirect costs refer to the closeness of cost tie with the overall business activities, direct costs are those related directly to these processes and are reversible like the price of raw materials whereas indirect costs are common costs allocated less directly like utility charges or managerial salary; Product and period costs refer to the time a cost influences a firm's money: product costs are actually incurred in the manufacturing process, therefore influencing costs as soon as the product is sold, on contrast period costs won't affect the company till a set period of time, like advertising.## Step3: Considering whether costs change is the most fundamental the expectation of costs concerning changes in operating levels, whether it be for individual activities, departments, or the company as a whole, so amongst the options the capacity of costs to vary according to production changes is a substantial way to predict cost behavior.