SUBJECT: COST MANAGEMENTASSIGNMENT: What type of cost is Depreciation classified as?Cost can be classified as either being a fixed cost or variable cost.Fixed Cost: Costs that do not change with the change in the activity level.Variable Cost: Costs that change with the change in the activity level.

As per the International Accounting Standards, there are 3 methods to calculate depreciation:

Straight line method Units of production method Diminishing balance method

Depreciation cost calculated under straight line method will be of the nature of fixed cost.Depreciation cost calculated under units of production method is variable in nature.Depreciation cost calculated under diminishing balance method is ambiguous in nature but we will consider it to be variable.

But, on the contrary, if we were to consider land, buildings and machinery, these assets are fixed assets. The depreciation on these assets is viewed as fixed cost or fixed expense.

As per my understanding, depreciation cost will be considered as a fixed cost. It is the allocation of a fixed cost asset over time. This spreads the cost of an asset out in increments over the accounting life of the asset rather than having the cost tied to production.