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Types of costs associated with managerial accounting, explained by our small business accountants in Melbourne

In accounting, a cost measures how much you have to sacrifice for a specific resource or asset. Managerial accounting must give managers accurate cost information relevant to their individual management decisions. Our small business accountants in Melbourne have listed several cost-related terms that small businesses may encounter regularly:

Fixed Costs
Our accountants for small business in Melbourne identify fixed costs as costs that don’t vary depending on the amount of work a company is doing. Examples of fixed costs include the payment on a building, insurance or a piece of machinery that is being depreciated.

Variable Costs
Variable costs are relevant to a company’s level of production. For example, things like machinery oil and fuel are both variable costs as they are relevant to the production volume and usage of that machinery.

Operating Costs
The day to day costs of running a business are classified as operating costs. Within our small business accounting service in Melbourne, operating costs can be either variable or fixed and include expenses such as costs for advertising, travel and sales materials.

Direct Costs
These are the costs related to producing a product. Direct costs include both the hours to make the product as well as the cost of the materials.

For more information on the types of costs associated with managerial accounting, please contact our small business accountants in Melbourne today.