Write a memo to your partner

At a dinner party you hosted, a friend of yours who is a college accounting professor, upon hearing you had started your own business, told you to make sure to properly categorize product versus period costs and fixed versus variable costs. The friend did not have time to explain the difference or the importance of proper categorization to you.

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Categorization of Production Costs

Introduction

Organizations incur various costs in their production cycle. These costs are known as production costs, and they refer to the total value of the resources uses to manufacture a particular commodity. Some of the organizational costs are fixed while others change with the production quantity.

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