SlideShare a Scribd company logo
BY:-
Bhashkar kumar
DKAC/033/2016-17
The cost concepts that are relevant to
business operation and decisions can be
grouped on the basis of their nature and
propose under to overlapping categories:-
1. Cost concept used for accounting propose
2. Analytical cost concepts and used in
economic analysis of business activities
COST CONCEPTS
ACCOUNTING COST
CONCEPTS :-
 Opportunity Cost And Actual Cost
 Business Cost And Full Costs
 Explicit Cost And Implicit Cost
 Out- Of- Pocket And Book Cost
ACCOUNTING COST CONCEPTS
1.Opportunity cost and actual cost-
actual cost is all paid out costs of
the business firms to take the
advantages of the best opportunity
available to them. The opportunity
cost is the opportunity lost for lack
of resources. An opportunity to
make income is lost because of
scarcity of resource like land,
labour, capital etc.
2.Business costs and full cost:-
business costs include all the
expenses that are incurred to
carry out a business. The
concept of business costs is
similar to the actual or real
costs.
3. Explicit Costs and Implicit
Costs:- The actual or explicit
costs are those which are
actually incurred by the firm in
payment for labour, material,
plant, building, machinery,
equipment, travelling and
transport, advertisement, etc.
the total money expenses,
recorded in the book of account
are, for all practical purposes,
the actual costs.
ANALYTICAL COST CONCEPTS -
Fixed And Variable Cost
Total, Average And Marginal Costs
Sort-run And Long-run Cost
Incremental Costs And Sunk Costs
Historical And Replacement Cost
Private And Social Costs
FIXED AND VARIABLE COST
Fixed Cost:- FC are that remain fixed an amount for a
certain quantity of output. Fixed cost those not vary with
variation in the output between zero and a certain of
output. In other words, cost that do not vary or remain
constant for a certain level of output are treated as fixed
cost.
Variable Cost:- VC are those which vary with the
variation in the total output. Variables cost include cost of
raw material, running cost of fixed capital, such as fuel,
repairs routine maintenance expenditure, direct labour
charge associated with the labour of the output and the
costs of all other inputs that vary with outputs.
TOTAL, AVERAGE AND
MARGINAL COSTS
Total Cost:- TC refers to the total outlays of
money expenditure, both explicit and implicit, on the resources
used to produce a given level of output. It includes both fixed
and variable cost.
Average Cost:- AC is of statistical nature-it is
not actual cost. It is obtained dividing the total cost (TC) by the
output.
Marginal Cost:- MC is defined as the addition to
the total cost on account of producing one additional unit of
the product. Or, marginal cost is the cost of the marginal unit
produced.
SHORT-RUN AND LONG-RUN COST
Short-Run:- Sort-run refers to the
time period during which scale of
production remain unchanged. The cost
incurred in the sort-run are called sort-run
costs. It includes both the variable and the
fixed costs.
Long- Run:- long-run cost on the
other hand are those that are incurred
increase the scale of production in the
long run . The costs are incurred on
the fixed factor like plant , building
,machine etc .
HISTORICAL AND
REPLACEMENT COST
Historical Cost: HC refers to the cost
incurred in past on the acquisition of
productive assets, e.g. land, building,
machinery, etc.
Replacement Cost: RC refers to the
expenditure made for replacing an old asset.
These concepts owe their significance to the
unstable nature of input prices. Stable prices
over time, other given, keep historical and
replacement costs on par with each other.
Instability in asset prices makes the two costs
differ from each other.
PRIVATE AND SOCIAL COSTS
Private Cost: PC are those which are actually
incurred or for provided for by an individual or a
firm on the purchase of goods and services from
the market. For a firm, all the actual costs, both
explicit and implicit, are private costs. Private
costs are internalized costs that are incorporated
in the firm’s total cost of production.
Social Cost: SC on the other hand, refers to
the total cost born by the society due to
production of commodity. Social costs include
both private cost and the external cost.
Cost concept

More Related Content

What's hot

Unit costing
Unit costing Unit costing
Unit costing
Usman Bin Saad
 
Price determinants of various market structures
Price determinants of various market structuresPrice determinants of various market structures
Price determinants of various market structures
Dr Naim R Kidwai
 
Marginal costing
Marginal costingMarginal costing
Marginal costing
omkarbhujbal6
 
Cost concept and analysis
Cost concept and analysisCost concept and analysis
Cost concept and analysis
rahul kapoliya
 
Price determination under oligopoly
Price determination under oligopolyPrice determination under oligopoly
Price determination under oligopoly
Jithin Thomas
 
Profit Maximisation
Profit MaximisationProfit Maximisation
Profit Maximisation
janakiraman79
 
Method of costing
Method of costingMethod of costing
Method of costing
skillssoft
 
Absorption costing vs variable costing
Absorption costing  vs variable costingAbsorption costing  vs variable costing
Absorption costing vs variable costing
Shankar Jyoti Doley
 
Chapter 07 Marginal Costing
Chapter 07   Marginal CostingChapter 07   Marginal Costing
Chapter 07 Marginal Costing
ayanthimadhumali
 
Contract Costing
Contract CostingContract Costing
Contract Costing
Md. Shamsur Rahman Heera
 
Cost Accounting
 Cost Accounting  Cost Accounting
Cost Accounting
Vijay R. Joshi
 
Managerial-Economics
Managerial-EconomicsManagerial-Economics
Managerial-Economics
Prathammk
 
Responsibility accounting
Responsibility  accountingResponsibility  accounting
Responsibility accounting
Kriti Avasthi
 
International Transfer Pricing Methods
International Transfer Pricing MethodsInternational Transfer Pricing Methods
International Transfer Pricing Methods
Sundar B N
 
Managerial Economics- Cost analysis and BEP Analysis notes
Managerial Economics- Cost analysis and BEP Analysis notesManagerial Economics- Cost analysis and BEP Analysis notes
Managerial Economics- Cost analysis and BEP Analysis notes
Dr. Durgaprasad Navulla
 
Ppt on Cost accounting and its classifications
Ppt on Cost accounting and its classifications Ppt on Cost accounting and its classifications
Ppt on Cost accounting and its classifications
Susheel Tiwari
 
Marginal costing
Marginal costingMarginal costing
Marginal costing
sai precious
 
Responsibility Accounting
Responsibility Accounting  Responsibility Accounting
Responsibility Accounting
MACFAST
 
Basic Concepts of Cost Accounting
Basic Concepts of Cost AccountingBasic Concepts of Cost Accounting
Basic Concepts of Cost Accounting
VR Talsaniya
 
Overview of cost & Management Accounting
Overview of cost & Management AccountingOverview of cost & Management Accounting
Overview of cost & Management Accounting
University of Jaffna
 

What's hot (20)

Unit costing
Unit costing Unit costing
Unit costing
 
Price determinants of various market structures
Price determinants of various market structuresPrice determinants of various market structures
Price determinants of various market structures
 
Marginal costing
Marginal costingMarginal costing
Marginal costing
 
Cost concept and analysis
Cost concept and analysisCost concept and analysis
Cost concept and analysis
 
Price determination under oligopoly
Price determination under oligopolyPrice determination under oligopoly
Price determination under oligopoly
 
Profit Maximisation
Profit MaximisationProfit Maximisation
Profit Maximisation
 
Method of costing
Method of costingMethod of costing
Method of costing
 
Absorption costing vs variable costing
Absorption costing  vs variable costingAbsorption costing  vs variable costing
Absorption costing vs variable costing
 
Chapter 07 Marginal Costing
Chapter 07   Marginal CostingChapter 07   Marginal Costing
Chapter 07 Marginal Costing
 
Contract Costing
Contract CostingContract Costing
Contract Costing
 
Cost Accounting
 Cost Accounting  Cost Accounting
Cost Accounting
 
Managerial-Economics
Managerial-EconomicsManagerial-Economics
Managerial-Economics
 
Responsibility accounting
Responsibility  accountingResponsibility  accounting
Responsibility accounting
 
International Transfer Pricing Methods
International Transfer Pricing MethodsInternational Transfer Pricing Methods
International Transfer Pricing Methods
 
Managerial Economics- Cost analysis and BEP Analysis notes
Managerial Economics- Cost analysis and BEP Analysis notesManagerial Economics- Cost analysis and BEP Analysis notes
Managerial Economics- Cost analysis and BEP Analysis notes
 
Ppt on Cost accounting and its classifications
Ppt on Cost accounting and its classifications Ppt on Cost accounting and its classifications
Ppt on Cost accounting and its classifications
 
Marginal costing
Marginal costingMarginal costing
Marginal costing
 
Responsibility Accounting
Responsibility Accounting  Responsibility Accounting
Responsibility Accounting
 
Basic Concepts of Cost Accounting
Basic Concepts of Cost AccountingBasic Concepts of Cost Accounting
Basic Concepts of Cost Accounting
 
Overview of cost & Management Accounting
Overview of cost & Management AccountingOverview of cost & Management Accounting
Overview of cost & Management Accounting
 

Similar to Cost concept

Cost concept analysis
Cost concept analysisCost concept analysis
Cost concept analysis
Milan Verma
 
Cost analysis
Cost analysisCost analysis
Cost analysis
Apeksha Bhatkar
 
MODULE 4 Managerial Economics.pptx
MODULE 4 Managerial Economics.pptxMODULE 4 Managerial Economics.pptx
MODULE 4 Managerial Economics.pptx
ssuserff5cd7
 
theory of cost perfect.pptx
theory of cost perfect.pptxtheory of cost perfect.pptx
theory of cost perfect.pptx
HiteshAhlawat9
 
theoryofcost.pptx
theoryofcost.pptxtheoryofcost.pptx
theoryofcost.pptx
HiteshAhlawat8
 
Theory of costs
Theory of costsTheory of costs
Theory of costs
Tilak Raj Chaulagai
 
Cost of production (1)
Cost of production (1)Cost of production (1)
Cost of production (1)
Sunil Singh
 
managerial economics
managerial economicsmanagerial economics
managerial economics
Shashank Pal
 
Cost in production
Cost in productionCost in production
Cost in production
AlaminRahaman
 
Cost analysis & Break even analysis
Cost analysis & Break even analysisCost analysis & Break even analysis
Cost analysis & Break even analysis
Karpagam Academy of Higher Education
 
Cost concepts and behaviours
Cost concepts and behavioursCost concepts and behaviours
Cost concepts and behaviours
Jai Vishal
 
Theory of Production and Cost, Break-even Analysis
Theory of Production and Cost, Break-even AnalysisTheory of Production and Cost, Break-even Analysis
Theory of Production and Cost, Break-even Analysis
Kumar Pawar
 
Cost & Revenue
Cost & RevenueCost & Revenue
Cost & Revenue
Nithin Kumar
 
Mefa ii unit pro cost, bep material
Mefa ii unit pro cost, bep materialMefa ii unit pro cost, bep material
Mefa ii unit pro cost, bep material
Dr. Durgaprasad Navulla
 
MEFA II UNIT MATAERIAL
MEFA II UNIT MATAERIALMEFA II UNIT MATAERIAL
MEFA II UNIT MATAERIAL
Dr. Durgaprasad Navulla
 
Cost concept and design economics .pptx
Cost concept and design economics .pptxCost concept and design economics .pptx
Cost concept and design economics .pptx
rayban8
 
Business Economics - Unit-4 - Osmania University
Business Economics - Unit-4 - Osmania UniversityBusiness Economics - Unit-4 - Osmania University
Business Economics - Unit-4 - Osmania University
Balasri Kamarapu
 
Theory of cost
Theory of costTheory of cost
Theory of cost
jesuslovesu
 
Ppt for economics
Ppt for economicsPpt for economics
Ppt for economics
Insharashid3
 
Accounting chapter-11
Accounting chapter-11Accounting chapter-11
Accounting chapter-11
Gyanbikash
 

Similar to Cost concept (20)

Cost concept analysis
Cost concept analysisCost concept analysis
Cost concept analysis
 
Cost analysis
Cost analysisCost analysis
Cost analysis
 
MODULE 4 Managerial Economics.pptx
MODULE 4 Managerial Economics.pptxMODULE 4 Managerial Economics.pptx
MODULE 4 Managerial Economics.pptx
 
theory of cost perfect.pptx
theory of cost perfect.pptxtheory of cost perfect.pptx
theory of cost perfect.pptx
 
theoryofcost.pptx
theoryofcost.pptxtheoryofcost.pptx
theoryofcost.pptx
 
Theory of costs
Theory of costsTheory of costs
Theory of costs
 
Cost of production (1)
Cost of production (1)Cost of production (1)
Cost of production (1)
 
managerial economics
managerial economicsmanagerial economics
managerial economics
 
Cost in production
Cost in productionCost in production
Cost in production
 
Cost analysis & Break even analysis
Cost analysis & Break even analysisCost analysis & Break even analysis
Cost analysis & Break even analysis
 
Cost concepts and behaviours
Cost concepts and behavioursCost concepts and behaviours
Cost concepts and behaviours
 
Theory of Production and Cost, Break-even Analysis
Theory of Production and Cost, Break-even AnalysisTheory of Production and Cost, Break-even Analysis
Theory of Production and Cost, Break-even Analysis
 
Cost & Revenue
Cost & RevenueCost & Revenue
Cost & Revenue
 
Mefa ii unit pro cost, bep material
Mefa ii unit pro cost, bep materialMefa ii unit pro cost, bep material
Mefa ii unit pro cost, bep material
 
MEFA II UNIT MATAERIAL
MEFA II UNIT MATAERIALMEFA II UNIT MATAERIAL
MEFA II UNIT MATAERIAL
 
Cost concept and design economics .pptx
Cost concept and design economics .pptxCost concept and design economics .pptx
Cost concept and design economics .pptx
 
Business Economics - Unit-4 - Osmania University
Business Economics - Unit-4 - Osmania UniversityBusiness Economics - Unit-4 - Osmania University
Business Economics - Unit-4 - Osmania University
 
Theory of cost
Theory of costTheory of cost
Theory of cost
 
Ppt for economics
Ppt for economicsPpt for economics
Ppt for economics
 
Accounting chapter-11
Accounting chapter-11Accounting chapter-11
Accounting chapter-11
 

More from Bhashkar kumar

Nonverbal communication
Nonverbal communicationNonverbal communication
Nonverbal communication
Bhashkar kumar
 
Natural and socio economic determinants, currunt policies and programms on po...
Natural and socio economic determinants, currunt policies and programms on po...Natural and socio economic determinants, currunt policies and programms on po...
Natural and socio economic determinants, currunt policies and programms on po...
Bhashkar kumar
 
Listening skill
Listening skillListening skill
Listening skill
Bhashkar kumar
 
Indifference curve
Indifference curveIndifference curve
Indifference curve
Bhashkar kumar
 
Group discussion 2
Group discussion 2Group discussion 2
Group discussion 2
Bhashkar kumar
 
Education
EducationEducation
Education
Bhashkar kumar
 
verbal and non verbal communication
verbal and non verbal communicationverbal and non verbal communication
verbal and non verbal communication
Bhashkar kumar
 
Want
WantWant
Group discussion
Group discussionGroup discussion
Group discussion
Bhashkar kumar
 
Elasticity of supply
Elasticity of supplyElasticity of supply
Elasticity of supply
Bhashkar kumar
 

More from Bhashkar kumar (10)

Nonverbal communication
Nonverbal communicationNonverbal communication
Nonverbal communication
 
Natural and socio economic determinants, currunt policies and programms on po...
Natural and socio economic determinants, currunt policies and programms on po...Natural and socio economic determinants, currunt policies and programms on po...
Natural and socio economic determinants, currunt policies and programms on po...
 
Listening skill
Listening skillListening skill
Listening skill
 
Indifference curve
Indifference curveIndifference curve
Indifference curve
 
Group discussion 2
Group discussion 2Group discussion 2
Group discussion 2
 
Education
EducationEducation
Education
 
verbal and non verbal communication
verbal and non verbal communicationverbal and non verbal communication
verbal and non verbal communication
 
Want
WantWant
Want
 
Group discussion
Group discussionGroup discussion
Group discussion
 
Elasticity of supply
Elasticity of supplyElasticity of supply
Elasticity of supply
 

Recently uploaded

BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...
Nguyen Thanh Tu Collection
 
Natural birth techniques - Mrs.Akanksha Trivedi Rama University
Natural birth techniques - Mrs.Akanksha Trivedi Rama UniversityNatural birth techniques - Mrs.Akanksha Trivedi Rama University
Natural birth techniques - Mrs.Akanksha Trivedi Rama University
Akanksha trivedi rama nursing college kanpur.
 
C1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptx
C1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptxC1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptx
C1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptx
mulvey2
 
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...
Dr. Vinod Kumar Kanvaria
 
How to Fix the Import Error in the Odoo 17
How to Fix the Import Error in the Odoo 17How to Fix the Import Error in the Odoo 17
How to Fix the Import Error in the Odoo 17
Celine George
 
Your Skill Boost Masterclass: Strategies for Effective Upskilling
Your Skill Boost Masterclass: Strategies for Effective UpskillingYour Skill Boost Masterclass: Strategies for Effective Upskilling
Your Skill Boost Masterclass: Strategies for Effective Upskilling
Excellence Foundation for South Sudan
 
MARY JANE WILSON, A “BOA MÃE” .
MARY JANE WILSON, A “BOA MÃE”           .MARY JANE WILSON, A “BOA MÃE”           .
MARY JANE WILSON, A “BOA MÃE” .
Colégio Santa Teresinha
 
Digital Artefact 1 - Tiny Home Environmental Design
Digital Artefact 1 - Tiny Home Environmental DesignDigital Artefact 1 - Tiny Home Environmental Design
Digital Artefact 1 - Tiny Home Environmental Design
amberjdewit93
 
Liberal Approach to the Study of Indian Politics.pdf
Liberal Approach to the Study of Indian Politics.pdfLiberal Approach to the Study of Indian Politics.pdf
Liberal Approach to the Study of Indian Politics.pdf
WaniBasim
 
The History of Stoke Newington Street Names
The History of Stoke Newington Street NamesThe History of Stoke Newington Street Names
The History of Stoke Newington Street Names
History of Stoke Newington
 
CACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdfCACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdf
camakaiclarkmusic
 
The basics of sentences session 6pptx.pptx
The basics of sentences session 6pptx.pptxThe basics of sentences session 6pptx.pptx
The basics of sentences session 6pptx.pptx
heathfieldcps1
 
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...
PECB
 
Advanced Java[Extra Concepts, Not Difficult].docx
Advanced Java[Extra Concepts, Not Difficult].docxAdvanced Java[Extra Concepts, Not Difficult].docx
Advanced Java[Extra Concepts, Not Difficult].docx
adhitya5119
 
A Strategic Approach: GenAI in Education
A Strategic Approach: GenAI in EducationA Strategic Approach: GenAI in Education
A Strategic Approach: GenAI in Education
Peter Windle
 
Pride Month Slides 2024 David Douglas School District
Pride Month Slides 2024 David Douglas School DistrictPride Month Slides 2024 David Douglas School District
Pride Month Slides 2024 David Douglas School District
David Douglas School District
 
clinical examination of hip joint (1).pdf
clinical examination of hip joint (1).pdfclinical examination of hip joint (1).pdf
clinical examination of hip joint (1).pdf
Priyankaranawat4
 
PCOS corelations and management through Ayurveda.
PCOS corelations and management through Ayurveda.PCOS corelations and management through Ayurveda.
PCOS corelations and management through Ayurveda.
Dr. Shivangi Singh Parihar
 
How to Manage Your Lost Opportunities in Odoo 17 CRM
How to Manage Your Lost Opportunities in Odoo 17 CRMHow to Manage Your Lost Opportunities in Odoo 17 CRM
How to Manage Your Lost Opportunities in Odoo 17 CRM
Celine George
 
A Independência da América Espanhola LAPBOOK.pdf
A Independência da América Espanhola LAPBOOK.pdfA Independência da América Espanhola LAPBOOK.pdf
A Independência da América Espanhola LAPBOOK.pdf
Jean Carlos Nunes Paixão
 

Recently uploaded (20)

BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 CẢ NĂM - GLOBAL SUCCESS - NĂM HỌC 2023-2024 (CÓ FI...
 
Natural birth techniques - Mrs.Akanksha Trivedi Rama University
Natural birth techniques - Mrs.Akanksha Trivedi Rama UniversityNatural birth techniques - Mrs.Akanksha Trivedi Rama University
Natural birth techniques - Mrs.Akanksha Trivedi Rama University
 
C1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptx
C1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptxC1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptx
C1 Rubenstein AP HuG xxxxxxxxxxxxxx.pptx
 
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...
 
How to Fix the Import Error in the Odoo 17
How to Fix the Import Error in the Odoo 17How to Fix the Import Error in the Odoo 17
How to Fix the Import Error in the Odoo 17
 
Your Skill Boost Masterclass: Strategies for Effective Upskilling
Your Skill Boost Masterclass: Strategies for Effective UpskillingYour Skill Boost Masterclass: Strategies for Effective Upskilling
Your Skill Boost Masterclass: Strategies for Effective Upskilling
 
MARY JANE WILSON, A “BOA MÃE” .
MARY JANE WILSON, A “BOA MÃE”           .MARY JANE WILSON, A “BOA MÃE”           .
MARY JANE WILSON, A “BOA MÃE” .
 
Digital Artefact 1 - Tiny Home Environmental Design
Digital Artefact 1 - Tiny Home Environmental DesignDigital Artefact 1 - Tiny Home Environmental Design
Digital Artefact 1 - Tiny Home Environmental Design
 
Liberal Approach to the Study of Indian Politics.pdf
Liberal Approach to the Study of Indian Politics.pdfLiberal Approach to the Study of Indian Politics.pdf
Liberal Approach to the Study of Indian Politics.pdf
 
The History of Stoke Newington Street Names
The History of Stoke Newington Street NamesThe History of Stoke Newington Street Names
The History of Stoke Newington Street Names
 
CACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdfCACJapan - GROUP Presentation 1- Wk 4.pdf
CACJapan - GROUP Presentation 1- Wk 4.pdf
 
The basics of sentences session 6pptx.pptx
The basics of sentences session 6pptx.pptxThe basics of sentences session 6pptx.pptx
The basics of sentences session 6pptx.pptx
 
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...
ISO/IEC 27001, ISO/IEC 42001, and GDPR: Best Practices for Implementation and...
 
Advanced Java[Extra Concepts, Not Difficult].docx
Advanced Java[Extra Concepts, Not Difficult].docxAdvanced Java[Extra Concepts, Not Difficult].docx
Advanced Java[Extra Concepts, Not Difficult].docx
 
A Strategic Approach: GenAI in Education
A Strategic Approach: GenAI in EducationA Strategic Approach: GenAI in Education
A Strategic Approach: GenAI in Education
 
Pride Month Slides 2024 David Douglas School District
Pride Month Slides 2024 David Douglas School DistrictPride Month Slides 2024 David Douglas School District
Pride Month Slides 2024 David Douglas School District
 
clinical examination of hip joint (1).pdf
clinical examination of hip joint (1).pdfclinical examination of hip joint (1).pdf
clinical examination of hip joint (1).pdf
 
PCOS corelations and management through Ayurveda.
PCOS corelations and management through Ayurveda.PCOS corelations and management through Ayurveda.
PCOS corelations and management through Ayurveda.
 
How to Manage Your Lost Opportunities in Odoo 17 CRM
How to Manage Your Lost Opportunities in Odoo 17 CRMHow to Manage Your Lost Opportunities in Odoo 17 CRM
How to Manage Your Lost Opportunities in Odoo 17 CRM
 
A Independência da América Espanhola LAPBOOK.pdf
A Independência da América Espanhola LAPBOOK.pdfA Independência da América Espanhola LAPBOOK.pdf
A Independência da América Espanhola LAPBOOK.pdf
 

Cost concept

  • 2. The cost concepts that are relevant to business operation and decisions can be grouped on the basis of their nature and propose under to overlapping categories:- 1. Cost concept used for accounting propose 2. Analytical cost concepts and used in economic analysis of business activities COST CONCEPTS
  • 3. ACCOUNTING COST CONCEPTS :-  Opportunity Cost And Actual Cost  Business Cost And Full Costs  Explicit Cost And Implicit Cost  Out- Of- Pocket And Book Cost
  • 4. ACCOUNTING COST CONCEPTS 1.Opportunity cost and actual cost- actual cost is all paid out costs of the business firms to take the advantages of the best opportunity available to them. The opportunity cost is the opportunity lost for lack of resources. An opportunity to make income is lost because of scarcity of resource like land, labour, capital etc.
  • 5. 2.Business costs and full cost:- business costs include all the expenses that are incurred to carry out a business. The concept of business costs is similar to the actual or real costs.
  • 6. 3. Explicit Costs and Implicit Costs:- The actual or explicit costs are those which are actually incurred by the firm in payment for labour, material, plant, building, machinery, equipment, travelling and transport, advertisement, etc. the total money expenses, recorded in the book of account are, for all practical purposes, the actual costs.
  • 7. ANALYTICAL COST CONCEPTS - Fixed And Variable Cost Total, Average And Marginal Costs Sort-run And Long-run Cost Incremental Costs And Sunk Costs Historical And Replacement Cost Private And Social Costs
  • 8. FIXED AND VARIABLE COST Fixed Cost:- FC are that remain fixed an amount for a certain quantity of output. Fixed cost those not vary with variation in the output between zero and a certain of output. In other words, cost that do not vary or remain constant for a certain level of output are treated as fixed cost. Variable Cost:- VC are those which vary with the variation in the total output. Variables cost include cost of raw material, running cost of fixed capital, such as fuel, repairs routine maintenance expenditure, direct labour charge associated with the labour of the output and the costs of all other inputs that vary with outputs.
  • 9. TOTAL, AVERAGE AND MARGINAL COSTS Total Cost:- TC refers to the total outlays of money expenditure, both explicit and implicit, on the resources used to produce a given level of output. It includes both fixed and variable cost. Average Cost:- AC is of statistical nature-it is not actual cost. It is obtained dividing the total cost (TC) by the output. Marginal Cost:- MC is defined as the addition to the total cost on account of producing one additional unit of the product. Or, marginal cost is the cost of the marginal unit produced.
  • 10. SHORT-RUN AND LONG-RUN COST Short-Run:- Sort-run refers to the time period during which scale of production remain unchanged. The cost incurred in the sort-run are called sort-run costs. It includes both the variable and the fixed costs. Long- Run:- long-run cost on the other hand are those that are incurred increase the scale of production in the long run . The costs are incurred on the fixed factor like plant , building ,machine etc .
  • 11. HISTORICAL AND REPLACEMENT COST Historical Cost: HC refers to the cost incurred in past on the acquisition of productive assets, e.g. land, building, machinery, etc. Replacement Cost: RC refers to the expenditure made for replacing an old asset. These concepts owe their significance to the unstable nature of input prices. Stable prices over time, other given, keep historical and replacement costs on par with each other. Instability in asset prices makes the two costs differ from each other.
  • 12. PRIVATE AND SOCIAL COSTS Private Cost: PC are those which are actually incurred or for provided for by an individual or a firm on the purchase of goods and services from the market. For a firm, all the actual costs, both explicit and implicit, are private costs. Private costs are internalized costs that are incorporated in the firm’s total cost of production. Social Cost: SC on the other hand, refers to the total cost born by the society due to production of commodity. Social costs include both private cost and the external cost.