Cost theory
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This document discusses key concepts in cost theory and its connection to cost accounting. It defines cost objects, explicit and implicit costs, and how economists and accountants analyze costs differently. Economists consider both explicit and implicit opportunity costs, while accountants only consider explicit costs involving cash outflows. The document provides examples to illustrate these differences and concepts like economic profit versus accounting profit. It also discusses production functions, marginal product, total costs curves, and other cost terminology.
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presents the revenues and expenses for a specific period of time.
reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
reports the assets, liabilities, and stockholders’ equity at a specific date.
summarizes the changes in retained earnings for a specific period of time.
The most important information needed to determine if companies can pay their current obligations is the
projected net income for next year.
relationship between current assets and current liabilities.
relationship between short-term and long-term liabilities.
net income for this year.
A liquidity ratio measures the
income or operating success of a company over a period of time.
ability of a company to survive over a long period of time.
percentage of total financing provided by creditors.
short-term ability of a company to pay its maturing obligations and to meet unexpected needs for
cash.
The convention of consistency refers to consistent use of accounting principles
among firms.
among accounting periods.
throughout the accounting periods.
within industries.
Horizontal analysis is also known as
vertical analysis.
trend analysis.
linear analysis.
common size analysis.
Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time
to determine the amount and/or percentage increase or decrease that has taken place.
that has been arranged from the lowest number to the highest number.
that has been arranged from the highest number to the lowest number.
to determine which items are in error.
Vertical analysis is a technique that expresses each item in a financial statement
starting with the highest value down to the lowest value.
in dollars and cents.
as a percent of the item in the previous year.
as a percent of a base amount.
Process costing is used when
production is aimed at filling a specific customer order.
dissimilar products are involved.
the production process is continuous.
costs are to be assigned to specific jobs.
An important feature of a job order cost system is that each job
has its own distinguishing characteristics.
must be completed before a new job is accepted.
consists of one unit of output.
must be similar to previous jobs completed.
In a process cost system, product costs are summarized:
after each unit is produced..
Competitiveness, strategy, productivity
Ability of an organization or a nation to offer products and services that meet the quality standards of the local and world markets at prices .
Costs of Production
Students will learn different types of costs which is included in production.How these cost are calculated and effect the production.
Economics presentation
The document discusses various concepts related to production costs, including:
1. It defines costs and different types of costs such as explicit costs, implicit costs, fixed costs, and variable costs.
2. It explains the differences between economic profit and accounting profit, noting that accounting profit ignores implicit costs.
3. It discusses production functions and how diminishing marginal returns can affect total costs in both the short-run and long-run for firms.
Break even points
The document discusses break-even analysis, which is used for planning and control. It defines fixed and variable costs and how they relate to sales volume. An example is provided to calculate the break-even point for a bagel shop in terms of number of meals needed to cover annual fixed costs of $81,650. The break-even point is calculated as 54,073 meals per year or 149 meals per day.
Break even china
This document provides an introduction to break-even analysis, including definitions of key terms and methods for calculating break-even points. It explains that break-even analysis is used to determine the level of output or sales needed to cover total costs. The document outlines the contribution method and break-even charts as two approaches. It provides examples of calculating break-even points using contribution per unit and defines margin of safety as the difference between current output and the break-even point.
Costs of Production, Production Function, Law of Diminishing Returns.pptx
This document discusses key concepts related to production theory and costs, including:
1. It defines economic costs as payments made to attract resources away from other opportunities, including explicit monetary costs and implicit opportunity costs.
2. It provides an example calculating total, explicit, and implicit costs for a small business.
3. Key terminologies are introduced like fixed/variable inputs, short/long run, total product, marginal product, and average product.
4. The relationship between marginal product, average product, and total product is explained, showing initial increases and eventual decreases as the law of diminishing returns takes effect.
Chapter 2 efficiency, externalities, consumer surplus, producer surplus etc
The document defines efficiency as producing goods and services at the lowest possible cost to provide the greatest value. Markets are efficient when marginal cost equals marginal benefit. When price is lower than value, consumers enjoy surplus, and when price exceeds costs, producers earn surplus. However, markets can be inefficient due to price controls, taxes/subsidies, monopoly, public goods, and externalities, resulting in deadweight loss to society.
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Danshui Plant No. 2 has a one-year contract with Apple to assemble 2.4 million iPhone 4 units but is concerned they will not meet the target as production after 3 months is only 180,000 units. The plant manager Wentao Chen is anxious because operating at this production level results in losses. The document provides production details for 180,000 units in August and calculates variances to determine where costs differ from the standard budget.
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- 1. Understanding of Cost Theory& its connection to Cost Accounting Gunel Poladova Date 0207
- 19. Total Cost Curve