WK5 DQ1.docx - Costing is any system for assigning costs to a component of a business Costing may include only the task of variable costs which are

WK5 DQ1.docx - Costing is any system for assigning costs to...

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Costing is any system for assigning costs to a component of a business. Costing may include only the task of variable costs, which are those costs that vary with some form of activity like sales or the number of employees. This type of costing is called direct costing. For example, the cost of materials diverges with the number of units produced, and so is a variable cost. Costing can also include the assignment of fixed costs, which are those costs that stay the same, irrespective of the level of activity. This type of costing is called absorption costing (Bragg, 2018). Examples of fixed costs are rent, insurance, and property taxes. Product cost refers to the costs used to create a product that is intended for sale to customers. These costs include direct material (DM), direct labor (DL) and manufacturing overhead, consumable production supplies, and factory overhead. Product cost can also be considered the cost of the labor required to deliver a service to a customer (Bragg, 2017). Product cost should include all costs related to a service,
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