Costs and Indirect Costs: Cost Classifications

Cost classification is important in budgeting, accounting, and project management areas. Categorization of expenses help project teams to understand what kind of costs will be spent during the life cycle of their project.

Many different types of cost classifications can be made such as;

- Direct and Indirect Costs
- Fixed and Variable Costs
- Customer Costs
- Departmental Costs
- Manufacturing Costs

The main difference between direct and indirect costs is that Direct costs are attributable to a specific product, department, goods, or service. On the other hand, indirect costs are attributable to multiple products or services.
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