Types of Costs Associated with Business

1. Direct costs: Direct costs are directly linked to the production of goods and services. These costs are variable and can directly be linked with production. Examples: Labor costs, raw materials, cost of distribution of goods or services, etc.
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2. Indirect costs: Indirect costs are those costs that cannot be directly traced to production. These are the general expenses in the business that keep the business functioning. Examples: Office rent, factory lease, power and water, other operating expenses, stationary expenses, etc.
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3. Controllable costs: These costs are non-essential costs that the respective departments can control. These costs can be used to raise the living standard and working conditions, provide facilities to employees, etc. Examples: Donations or charity, stationery, facility improvement, structural improvement, some part of advertising, etc.
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4. Non-controllable costs: Non-controllable costs are the costs that are required for the company to add value to the product and services. These costs cannot be controlled and optimized without affecting the business operations in the short run. Examples: depreciation of assets, rent allocations, insurance, etc.
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5. Sunk costs: These are costs that have been incurred in the past and cannot be recovered further by any managerial decisions. These costs cannot be avoided and the company is bound to bear these. Examples: Any costs like salary, health insurance, or retirement allowance that have already been incurred by the company and can no longer be recovered.