6. Partial cost approach
We have seen the difficulties and risks of arbitrariness posed by the allocation of overheads in full-cost methods. To study certain problems, it is better to reason in terms of partial costs and calculate margins rather than analytical results.
6.1 "Simple direct costing or variable cost method
The simplest method is "direct costing". Note that the adjective "direct" is a "false friend", as we say in high school English classes: it should be translated not by direct, but by variable.
In fact, in this approach, only 2 categories of expenses are retained:
operating expenses (assumed to be both direct and variable) ;
overheads (assumed to be both indirect...
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Partial cost approach
Standard or pre-established costs
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It's important to understand that this article is only a brief introduction to the basics of cost accounting, which is a fundamental discipline in management and features prominently in all accounting training courses in France and the French-speaking world; in business schools, in university management courses and in establishments such as CNAM-INTEC.
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