NATURAL CLASSIFICATION Definition

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NATURAL CLASSIFICATION of costs focuses on the nature of the cost item. In this classification structure, the total operating costs of an activity can be classified into manufacturing costs and commercial costs. Manufacturing costs include all direct materials and direct labor, as well as, factory overhead. Such factory overhead costs include indirect materials (such as factory supplies & lubricants), indirect labor (such as supervision and inspection) and other indirect costs (such as rent, insurance, and utilities). Commercial expenses include marketing expenses (such as advertising, printing, and sales salaries) and administrative (general and administrative (G&A)) expenses (such as administrative office salaries, rent, and legal expenses).

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TAXABLE EQUIVALENT YIELD is the yield that must be received on a taxable security to provide the holder with the same after-tax return as that earned on a tax-exempt bond or preferred stock.

RETAIL is the selling of goods directly to consumers; usually in small quantities and not for resale.

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