Explain the Different Types of Cost Concepts

Cost concepts in decision making Fixed Variable and Mixed Costs. Past Cost and Future Costs 4.

Cost Sheet Accounting And Finance Cost Control

Opportunity cost refers to the loss of earnings due to opportunities foregone due.

. The above table shows different types of cost concept. Costs may also be classified according to the time element in it. Opportunity Cost and Actual Cost.

Short-run and Long-run costs. Cost refers the monetary measure of the amount of resources given up or used for some specific purpose. Outlay and Opportunity Costs.

These costs vary with the change in volume of production. All manufacturing costs direct materials direct labor and factory overhead are product costs. Historical cost is the original cost of an asset.

Marginal cost is the cost of producing an additional unit of output while incremental cost is defined as the change in cost resulting from a change in business activities. The cost concepts are. Age can be derived from date of birth where Age is the derived attribute.

Direct costs are related to producing a good or service. Accordingly costs are classified into. Fixed and Variable Costs 6.

Indirect costs on the other hand are expenses unrelated to producing a good or service. These costs are also called supplementary costs indirect costs overhead costs historical costs and unavoidable costs. Business costs include all the expenses which are incurred to.

Business Costs and Full Costs. TFC remains constant with respect to change in the level of output. Unlike explicit costs.

Variable cost varies with output and is zero at zero output level. Cost of sales only when sold. Therefore the slope of TFC curve is a horizontal straight line.

Types of Costs Opportunity Costs. Explicit costs also referred to as actual costs include those payments that the employer makes to. Different Types of Costs Historical and Replacement costs.

Fixed and Variable Costs Cost is something that can be classified in several ways depending on its nature. Fixed cost is fixed at Rs. Cost concepts are vital in many areas of planning control and decision-making.

Avoidable Cost and Unavoidable Cost 9. In other words incremental cost is the total additional cost related to marginal quantity of output. Different Cost Concepts An Overview 1.

Derived Attributes or stored Attributes. When one attribute value is derived from the other is called a derived attribute. Opportunity cost is also referred to as alternative cost.

The advantage arises due to the inverse relationship between per-unit fixed cost and the quantity produced. There are various types of cost. 30 for every level of output.

On the other hand opportunity costs are the costs of missed opportunities. Out of Pocket Costs 3. In this unit we will learn about the different types of costs and product costing systems.

What Are the Types of Costs in Cost Accounting. Classification of Cost Types of Cost. A direct cost includes raw materials labor and.

On the basis of Nature of Costs Fixed Cost It is the cost of fixed inputs used in production. Organisations tend to utilise their limited. Fixed Cost Variable Cost Average Cost and Marginal Cost Opportunity Cost The resources of any firm operating in the market are limited and investment options are many.

Historical Costs are those costs which are taken into consideration after they have been incurred. Period costs - are not inventoriable and are charged against revenue immediately. The Cost Concept states that the business to be recorded the assets at their original purchase price and the cost will be the basis for all the subsequent accounting period.

A product may be an incidental by-product of a production process such as sawdust at a lumber mill. Product costs - are inventoriable costs. Explicit costs can be variable or fixed just a clear amount.

DOB is the stored attribute. Cost is always measured as opportunity cost because cost of producing a given amount of output is to be measured in terms of the sacrifices made in the producing that output. Short-Run and Long-Run Costs 5.

Actual Cost and Opportunity Cost 2. The following points highlight the top nine cost concepts used in decision making. In other words it compares the policy chosen and policy rejected.

The greater the quantity of output produced the lower the per-unit fixed cost. Fixed costs have implication even when the production of an organization is zero. The assets shown in the.

Total cost is the summation of both fixed and variable costs. And ii Predetermined Costs. Explicit costs these are costs that a firm directly pays for and can be seen on the accounting sheet.

They form part of inventory and are charged against revenue ie. Incremental Costs and Sunk Costs 3. Implicit costs these are opportunity costs which do not necessarily appear on.

Cost Concept 1. The kind of cost concept to be used in a particular situation depends upon the business decisions to be made. Marginal cost is the rate of change of total cost.

Short-run is a period during which the physical capacity of the firm remains fixed. The life of business is segregated into different period such as 1 year 6 months etc. To know the performance of the business.

A fixed cost such as rent does not change in lock step with the level of activity. Relevant Cost and Irrelevant Cost. Variable Cost It is the cost of variable inputs used in production.

Period costs include non-manufacturing costs ie. These costs do not vary with the change in volume of production. Historical cost valuation shows.

Outlay costs include the actual expenditure of funds on factors like material rent wages etc. Outlay cost concepts are actual expenditures and the books of accounts record them. Explicit Cost It is the opportunity cost of hiring purchasing input from market in short it is the payment made by a firm to other for hiring purchasing input from the market.

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