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Cost item | Category | Description |
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Direct material cost | Variable | The materials (parts, and subsystems) that go into the final product |
Direct labor cost | Variable | Constant productivity of people directly involved in production |
Energy | Variable | Used primarily for production |
SAG | Variable | Selling, administrative, and general costs |
Commissions | Variable | Usually proportional to the quantity of goods sold |
Shipping | Variable | Sometimes, a portion with the supplier and a portion with the buyer |
R&D | Fixed | Research and development tasks |
Fixed cost | Fixed | Amortization of capital goods, rent, depreciation of buildings and equipment, taxes on real estate, insurance, salaries of top management and operating personnel |
Discretionary fixed | Fixed | Advertising, public relations, management development programs |
IP acquisition cost | Quasi-fixed | Intellectual property design cost, licensing agreement, and royalty payment |
Manufacturing overhead cost | Quasi-fixed | Maintenance and repairs on production equipment, heat and light, and depreciation |
Indirect labor | Quasi-fixed | Discrete jump will happen when the overall scale of production drastically changes. |
Profits | Quasi-fixed | Depending on pricing strategies |
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