This document discusses concepts related to production and cost analysis. It begins by defining production as a manufacturing process that transforms inputs like raw materials, work in progress, and finished goods. It then discusses different types of production functions including short run and long run production functions. It also discusses cost analysis concepts like actual costs, opportunity costs, sunk costs, and different types of variable, fixed, and average costs. Overall, the document provides an overview of key theoretical concepts in production and cost analysis.
This document defines key concepts related to production analysis, including:
1. Production functions relate inputs like labor, capital, and technology to the quantity of output. They show the technical relationship between inputs and maximum possible output.
2. The law of diminishing marginal returns states that adding more of one variable input, while holding other inputs fixed, will eventually result in smaller increases in output.
3. Total, average, and marginal product are used to analyze how output changes with variable inputs. Total product is total output. Average product is total output divided by the input. Marginal product is the change in total output from an extra unit of input.
Economic theory of production and production costEllen Pineda
The document discusses economic theory of production and production costs. It defines a firm as an entity that buys inputs, converts them into outputs, and sells the outputs. A firm operates between input and output markets. The production function defines the maximum output achievable from given inputs. Total cost is derived from the production function and includes fixed, variable, marginal, and average costs. Firms aim to minimize costs and equalize marginal productivity across inputs in both the short and long run to produce at the lowest possible cost.
Marginal costing is an accounting technique that separates total costs into fixed and variable components. It only includes variable costs when determining the cost of producing an additional unit. This helps management compare costs between time periods and determine profitability. CVP (cost-volume-profit) analysis studies the relationships between selling price, costs, volume, and profits. It shows how costs and profits change with volume and can help with decision making, budgeting, and performance evaluation. While useful for short-term analysis, marginal costing has limitations such as difficulty separating fixed and variable costs.
This document provides information on cost accounting, management accounting, cost behavior analysis, budgeting, and related concepts. It defines key terms like cost center, revenue center, and discusses topics like standard costing, cost accumulation methods, and financial statements. It also summarizes cost-volume-profit analysis using both the contribution margin and break-even approaches to determine the sales volume needed to reach the break-even point. Finally, it defines what a budget is, the purposes of budgetary control, and introduces the concept of zero-base budgeting.
Production involves transforming inputs like labor, machines, and raw materials into outputs. There are two types of inputs: fixed inputs whose supply is inelastic in the short run, and variable inputs whose supply is elastic. A firm's production function describes its output as a function of inputs and can be expressed as short run or long run. The law of diminishing returns states that as one variable input is increased while others stay fixed, marginal product initially increases but eventually decreases. Returns to scale refers to output changes from proportional input changes, and can exhibit increasing, constant, or diminishing returns based on the relationship between input and output changes.
1) The document provides information on the theory of production and cost, including definitions and concepts related to production, factors of production, and capital formation.
2) It defines production as the transformation of inputs or resources into finished goods and services, and outlines the different types of utility created through production.
3) The main factors of production are identified as land, labor, capital, and entrepreneurship, and their key features are described.
4) Capital formation is defined as the increased production of capital goods like machinery and infrastructure that are used for further production.
Marginal costing is a type of flexible standard costing that separates fixed costs from variable costs. It is a comprehensive method for planning and monitoring costs based on resource drivers. Marginal costing ensures cost fluctuations from changes in operating levels are accurately predicted and incorporated into variance analysis. It has become widely accepted in business over the last 50 years. Marginal cost is the change in total cost from producing one more unit. It includes any additional costs to produce the next unit and varies depending on production levels and time periods considered. The relationship between marginal cost and economies of scale depends on whether average or marginal costs are falling or rising with production. Externalities can cause private and social costs to diverge.
Introduction to management accounting, cost concepts and classificationshewit
This document provides an introduction to management accounting and cost concepts. It defines management accounting as preparing financial information for managers to make short-term decisions. Management accounting assists planning, organizing, directing and controlling by providing data, modifying data, analyzing and interpreting data, and facilitating control through budgeting and standard costing. It then compares management accounting to financial accounting, noting their different objectives, time focus, treatment of monetary and non-monetary items, level of analysis, periodicity of reporting, and flexibility. Cost concepts and classifications are also introduced, including direct vs indirect costs, variable vs fixed costs, and manufacturing, non-manufacturing and mixed costs.
This document defines key concepts related to production analysis, including:
1. Production functions relate inputs like labor, capital, and technology to the quantity of output. They show the technical relationship between inputs and maximum possible output.
2. The law of diminishing marginal returns states that adding more of one variable input, while holding other inputs fixed, will eventually result in smaller increases in output.
3. Total, average, and marginal product are used to analyze how output changes with variable inputs. Total product is total output. Average product is total output divided by the input. Marginal product is the change in total output from an extra unit of input.
Economic theory of production and production costEllen Pineda
The document discusses economic theory of production and production costs. It defines a firm as an entity that buys inputs, converts them into outputs, and sells the outputs. A firm operates between input and output markets. The production function defines the maximum output achievable from given inputs. Total cost is derived from the production function and includes fixed, variable, marginal, and average costs. Firms aim to minimize costs and equalize marginal productivity across inputs in both the short and long run to produce at the lowest possible cost.
Marginal costing is an accounting technique that separates total costs into fixed and variable components. It only includes variable costs when determining the cost of producing an additional unit. This helps management compare costs between time periods and determine profitability. CVP (cost-volume-profit) analysis studies the relationships between selling price, costs, volume, and profits. It shows how costs and profits change with volume and can help with decision making, budgeting, and performance evaluation. While useful for short-term analysis, marginal costing has limitations such as difficulty separating fixed and variable costs.
This document provides information on cost accounting, management accounting, cost behavior analysis, budgeting, and related concepts. It defines key terms like cost center, revenue center, and discusses topics like standard costing, cost accumulation methods, and financial statements. It also summarizes cost-volume-profit analysis using both the contribution margin and break-even approaches to determine the sales volume needed to reach the break-even point. Finally, it defines what a budget is, the purposes of budgetary control, and introduces the concept of zero-base budgeting.
Production involves transforming inputs like labor, machines, and raw materials into outputs. There are two types of inputs: fixed inputs whose supply is inelastic in the short run, and variable inputs whose supply is elastic. A firm's production function describes its output as a function of inputs and can be expressed as short run or long run. The law of diminishing returns states that as one variable input is increased while others stay fixed, marginal product initially increases but eventually decreases. Returns to scale refers to output changes from proportional input changes, and can exhibit increasing, constant, or diminishing returns based on the relationship between input and output changes.
1) The document provides information on the theory of production and cost, including definitions and concepts related to production, factors of production, and capital formation.
2) It defines production as the transformation of inputs or resources into finished goods and services, and outlines the different types of utility created through production.
3) The main factors of production are identified as land, labor, capital, and entrepreneurship, and their key features are described.
4) Capital formation is defined as the increased production of capital goods like machinery and infrastructure that are used for further production.
Marginal costing is a type of flexible standard costing that separates fixed costs from variable costs. It is a comprehensive method for planning and monitoring costs based on resource drivers. Marginal costing ensures cost fluctuations from changes in operating levels are accurately predicted and incorporated into variance analysis. It has become widely accepted in business over the last 50 years. Marginal cost is the change in total cost from producing one more unit. It includes any additional costs to produce the next unit and varies depending on production levels and time periods considered. The relationship between marginal cost and economies of scale depends on whether average or marginal costs are falling or rising with production. Externalities can cause private and social costs to diverge.
Introduction to management accounting, cost concepts and classificationshewit
This document provides an introduction to management accounting and cost concepts. It defines management accounting as preparing financial information for managers to make short-term decisions. Management accounting assists planning, organizing, directing and controlling by providing data, modifying data, analyzing and interpreting data, and facilitating control through budgeting and standard costing. It then compares management accounting to financial accounting, noting their different objectives, time focus, treatment of monetary and non-monetary items, level of analysis, periodicity of reporting, and flexibility. Cost concepts and classifications are also introduced, including direct vs indirect costs, variable vs fixed costs, and manufacturing, non-manufacturing and mixed costs.
This document defines and explains various cost concepts that are important for business decision making. It discusses the differences between future and past costs, incremental and sunk costs, out-of-pocket and book costs, historical and replacement costs, explicit and implicit costs, actual and opportunity costs, direct and indirect costs, shut down and abandonment costs, and private and social costs. The key message is that different types of costs are relevant for different business problems, so it is important to use the right cost analysis approach.
This document discusses cost analysis and various cost concepts. It begins by defining cost analysis and its importance in business decision making. It then outlines several types of costs including: opportunity cost, economic cost, accounting cost, private and social costs, incremental and sunk costs, direct and indirect costs, average, marginal and total costs. It also discusses cost-output relationships in the short-run and long-run, factors determining costs, and break-even analysis. The key purpose is to provide an overview of different cost concepts and cost-output relationships that are important for business analysis and decision making.
This document defines key cost accounting terms and concepts. It discusses the objectives of cost accounting like ascertaining costs, determining selling prices, and assisting management decision making. It distinguishes between cost reduction and cost control and highlights their differences. The importance of cost accounting to businesses is outlined for decision making, cost control, budgeting, efficiency measurement, and price determination. Financial accounting is distinguished from cost accounting. Finally, it describes different bases for classifying costs like functions, controllability, normality, and relevance for decision making.
Chapter 5 the production process and costsskceducation
This chapter discusses key concepts related to production processes and costs. It introduces the production function and how managers can influence productivity. It also covers calculating costs from production functions, including fixed, variable, and marginal costs. Input combinations are shown using isoquants and isocost lines, and how firms minimize costs by finding the optimal input mix where the isoquant is tangent to the lowest isocost line. The chapter concludes with economies and diseconomies of scale and their impact on long-run average costs.
Application of marginal costing technique & its limitationsVivek Mahajan
This document is a project report submitted by a student named Vivek Shriram Mahajan to the University of Mumbai in partial fulfillment of an M.Com degree in Accountancy. The report discusses the application of marginal costing technique and its limitations. It includes an introduction, objectives and importance of cost accounting, an introduction to marginal costing explaining key concepts, applications of marginal costing in managerial decisions, advantages and disadvantages, and limitations of the marginal costing technique.
The document discusses key concepts related to production theory and cost analysis. It defines production as transforming inputs into outputs. Inputs can be fixed or variable, and production functions are classified as short-run or long-run depending on whether inputs are fixed or variable. The law of diminishing returns and returns to scale are explained. Cost concepts like total, average, fixed and variable costs are introduced. Break-even analysis is defined as a technique to understand the relationship between sales, costs and profits. Key assumptions and applications of break-even analysis are also outlined.
The document defines key terms related to cost accounting including:
- Cost, revenue, and profit. Revenue is sales, costs include expenses to generate sales, and profit is revenue minus costs.
- Fixed and variable costs. Fixed costs remain the same regardless of production levels, while variable costs change with production levels.
- The three main financial statements are the income statement, balance sheet, and cash flow statement. The income statement shows profits, the balance sheet assets/liabilities over time, and the cash flow statement tracks cash inflows/outflows.
- Manufacturing costs include direct materials, direct labor, and manufacturing overhead. Non-manufacturing costs are marketing/selling and administrative.
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 1Dwi Wahyu
Materi Bab 1 Introduction: The Role, History, And
Direction Of Management Accounting, Akuntansi Manajemen buku Hansen & Mowen Edisi 8. Presentasi powerpoint oleh Gail B. Wright, Professor Emeritus of Accounting, Bryant University
This document provides an overview of different types of costs that are relevant for business. It defines and gives examples of various costs including actual costs, opportunity costs, sunk costs, incremental costs, explicit costs, implicit costs, book costs, out of pocket costs, accounting costs, economic costs, direct costs, indirect costs, controllable costs, non-controllable costs, historical costs, replacement costs, shutdown costs, abandonment costs, urgent costs, business costs, fixed costs, variable costs, total costs, average costs, marginal costs, short run costs, and long run costs. The document is a presentation on costs submitted by a student for their coursework.
Cost means the amount of expenditure (actual or notional) incurred on, or attributable to, a given thing.
The Institute of Cost and Management Accountant, England (ICMA) has defined Cost Accounting as – “the process of accounting for the costs from the point at which expenditure incurred, to the establishment of its ultimate relationship with cost centers and cost units.
In its widest sense, it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of activities carried out or planned”.
- A business firm employs factors of production like resources to produce goods and services that are sold to consumers, other firms, or the government.
- Firms arise when individuals can obtain benefits from working as a team, with managers directing employees and monitoring workers to reduce shirking.
- Exchanges take place inside the firm between individuals forming teams and workers choosing monitors, and outside the firm as the firm sells its products.
Cost curves show the relationship between a firm's costs and output. There are several types of costs in the short-run and long-run:
1. Short-run costs include total, fixed, variable, average, and marginal costs. Total cost is the sum of fixed and variable costs. Average costs depend on total costs and output. Marginal cost is the change in total cost from a one-unit change in output.
2. Long-run costs have no fixed costs since all inputs are variable. Long-run total and average costs depend on minimum costs of production at different output levels. Long-run marginal cost is the change in total cost from a change in all variable inputs.
3
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 18Dwi Wahyu
1. The document discusses international issues in management accounting. It covers topics like the role of management accountants in international business, levels of international trade involvement, managing foreign currency risk, reasons for decentralization in multinational companies, performance evaluation in multinational companies, and transfer pricing.
2. It provides learning objectives for each topic and defines key terms. For example, it defines tariffs, foreign trade zones, outsourcing, and joint ventures.
3. It discusses how management accountants can help companies manage transaction risk, economic risk, and translation risk from currency fluctuations through hedging and forward contracts. It also covers challenges like addressing language differences and using multiple measures for performance evaluations across cultures
This document defines and provides examples of different types of costs that can be classified in various ways for accounting and management purposes. It discusses costs classified by nature (material, labor, expenses), functions (production, selling, distribution, etc.), identifiability (direct, indirect), variability (fixed, variable, step), controllability (controllable, uncontrollable), normality (normal, abnormal), and more. Key points covered include definitions of direct costs, indirect costs, fixed costs, variable costs, product costs, period costs, and common/joint costs.
theory of production ( EEM PPT / SEM 4 GTU )tejaspatel1997
The document provides information about the theory of production and the factors of production.
It begins with an introduction to the theory of production, defining it as the process of converting inputs into outputs. It then discusses the production function and how it represents the relationship between inputs and outputs.
The main body of the document is dedicated to explaining the four factors of production: land, labor, capital, and entrepreneurship. It provides examples and definitions for each factor.
The document concludes by discussing some concepts that influence entrepreneurial decision making, such as scarcity, opportunity cost, and productivity. It emphasizes how entrepreneurs must use resources efficiently to maximize profits.
This document provides an overview of key concepts in industrial economics including:
1. It discusses micro and macro economics, and defines industrial economics as dealing with economic problems of firms and industries.
2. Some key concepts covered include production functions, costs, revenues, and market structures like monopoly and price discrimination.
3. Laws of production like returns to scale and variable proportions are explained, as well as cost concepts like total, average, and marginal costs.
The document discusses cost theory and concepts. It provides definitions of key cost terms like fixed costs, variable costs, total costs, average costs, and marginal costs. It explains the relationships between these costs and output levels in the short run. Fixed costs remain constant while variable costs and total costs increase with output in the short run. The total, average, and marginal cost curves are U-shaped in the short run.
This document discusses various cost concepts that are relevant for business operations and decision making. It groups the concepts into accounting cost concepts and analytical cost concepts. Some key accounting cost concepts discussed include opportunity cost vs actual cost, business cost vs full cost, explicit vs implicit cost, and out-of-pocket vs book cost. Analytical cost concepts discussed include fixed vs variable cost, total/average/marginal cost, short-run vs long-run cost, incremental vs sunk cost, historical vs replacement cost, and private vs social cost.
This document discusses key concepts in cost accounting. It defines costs as values of resources that go into producing goods and services. It outlines the main elements of cost including direct and indirect materials, direct and indirect labor, and various overhead costs. It also classifies costs according to different criteria such as behavior, function, and management. The purpose of cost accounting is explained as providing internal reporting for management and external reporting for financial statements. The importance of cost accounting to various stakeholders like workers, government, and customers is also highlighted.
Meaning of Cost Analysis
Basic Cost Concept
Basic concept of financial Accounting/ Accounting Rules-Problems
Depreciation
Methods of Depreciation -Problems
Break Even Analysis
Marginal Uses of BEA
This document discusses cost concepts relevant for production planning and decision making. It defines different types of costs such as explicit vs implicit costs, direct vs indirect costs, private vs social costs, relevant vs irrelevant costs, economic vs accounting costs, separable vs common costs, and fixed vs variable costs. It also explores the relationship between production and costs, discussing how cost functions are related to production functions and how average and marginal costs are related to average and marginal products. Short-run cost functions are examined, showing how total, average, and marginal costs change at different output levels when some factors are fixed in the short-run.
This document defines and explains various cost concepts that are important for business decision making. It discusses the differences between future and past costs, incremental and sunk costs, out-of-pocket and book costs, historical and replacement costs, explicit and implicit costs, actual and opportunity costs, direct and indirect costs, shut down and abandonment costs, and private and social costs. The key message is that different types of costs are relevant for different business problems, so it is important to use the right cost analysis approach.
This document discusses cost analysis and various cost concepts. It begins by defining cost analysis and its importance in business decision making. It then outlines several types of costs including: opportunity cost, economic cost, accounting cost, private and social costs, incremental and sunk costs, direct and indirect costs, average, marginal and total costs. It also discusses cost-output relationships in the short-run and long-run, factors determining costs, and break-even analysis. The key purpose is to provide an overview of different cost concepts and cost-output relationships that are important for business analysis and decision making.
This document defines key cost accounting terms and concepts. It discusses the objectives of cost accounting like ascertaining costs, determining selling prices, and assisting management decision making. It distinguishes between cost reduction and cost control and highlights their differences. The importance of cost accounting to businesses is outlined for decision making, cost control, budgeting, efficiency measurement, and price determination. Financial accounting is distinguished from cost accounting. Finally, it describes different bases for classifying costs like functions, controllability, normality, and relevance for decision making.
Chapter 5 the production process and costsskceducation
This chapter discusses key concepts related to production processes and costs. It introduces the production function and how managers can influence productivity. It also covers calculating costs from production functions, including fixed, variable, and marginal costs. Input combinations are shown using isoquants and isocost lines, and how firms minimize costs by finding the optimal input mix where the isoquant is tangent to the lowest isocost line. The chapter concludes with economies and diseconomies of scale and their impact on long-run average costs.
Application of marginal costing technique & its limitationsVivek Mahajan
This document is a project report submitted by a student named Vivek Shriram Mahajan to the University of Mumbai in partial fulfillment of an M.Com degree in Accountancy. The report discusses the application of marginal costing technique and its limitations. It includes an introduction, objectives and importance of cost accounting, an introduction to marginal costing explaining key concepts, applications of marginal costing in managerial decisions, advantages and disadvantages, and limitations of the marginal costing technique.
The document discusses key concepts related to production theory and cost analysis. It defines production as transforming inputs into outputs. Inputs can be fixed or variable, and production functions are classified as short-run or long-run depending on whether inputs are fixed or variable. The law of diminishing returns and returns to scale are explained. Cost concepts like total, average, fixed and variable costs are introduced. Break-even analysis is defined as a technique to understand the relationship between sales, costs and profits. Key assumptions and applications of break-even analysis are also outlined.
The document defines key terms related to cost accounting including:
- Cost, revenue, and profit. Revenue is sales, costs include expenses to generate sales, and profit is revenue minus costs.
- Fixed and variable costs. Fixed costs remain the same regardless of production levels, while variable costs change with production levels.
- The three main financial statements are the income statement, balance sheet, and cash flow statement. The income statement shows profits, the balance sheet assets/liabilities over time, and the cash flow statement tracks cash inflows/outflows.
- Manufacturing costs include direct materials, direct labor, and manufacturing overhead. Non-manufacturing costs are marketing/selling and administrative.
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 1Dwi Wahyu
Materi Bab 1 Introduction: The Role, History, And
Direction Of Management Accounting, Akuntansi Manajemen buku Hansen & Mowen Edisi 8. Presentasi powerpoint oleh Gail B. Wright, Professor Emeritus of Accounting, Bryant University
This document provides an overview of different types of costs that are relevant for business. It defines and gives examples of various costs including actual costs, opportunity costs, sunk costs, incremental costs, explicit costs, implicit costs, book costs, out of pocket costs, accounting costs, economic costs, direct costs, indirect costs, controllable costs, non-controllable costs, historical costs, replacement costs, shutdown costs, abandonment costs, urgent costs, business costs, fixed costs, variable costs, total costs, average costs, marginal costs, short run costs, and long run costs. The document is a presentation on costs submitted by a student for their coursework.
Cost means the amount of expenditure (actual or notional) incurred on, or attributable to, a given thing.
The Institute of Cost and Management Accountant, England (ICMA) has defined Cost Accounting as – “the process of accounting for the costs from the point at which expenditure incurred, to the establishment of its ultimate relationship with cost centers and cost units.
In its widest sense, it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of activities carried out or planned”.
- A business firm employs factors of production like resources to produce goods and services that are sold to consumers, other firms, or the government.
- Firms arise when individuals can obtain benefits from working as a team, with managers directing employees and monitoring workers to reduce shirking.
- Exchanges take place inside the firm between individuals forming teams and workers choosing monitors, and outside the firm as the firm sells its products.
Cost curves show the relationship between a firm's costs and output. There are several types of costs in the short-run and long-run:
1. Short-run costs include total, fixed, variable, average, and marginal costs. Total cost is the sum of fixed and variable costs. Average costs depend on total costs and output. Marginal cost is the change in total cost from a one-unit change in output.
2. Long-run costs have no fixed costs since all inputs are variable. Long-run total and average costs depend on minimum costs of production at different output levels. Long-run marginal cost is the change in total cost from a change in all variable inputs.
3
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 18Dwi Wahyu
1. The document discusses international issues in management accounting. It covers topics like the role of management accountants in international business, levels of international trade involvement, managing foreign currency risk, reasons for decentralization in multinational companies, performance evaluation in multinational companies, and transfer pricing.
2. It provides learning objectives for each topic and defines key terms. For example, it defines tariffs, foreign trade zones, outsourcing, and joint ventures.
3. It discusses how management accountants can help companies manage transaction risk, economic risk, and translation risk from currency fluctuations through hedging and forward contracts. It also covers challenges like addressing language differences and using multiple measures for performance evaluations across cultures
This document defines and provides examples of different types of costs that can be classified in various ways for accounting and management purposes. It discusses costs classified by nature (material, labor, expenses), functions (production, selling, distribution, etc.), identifiability (direct, indirect), variability (fixed, variable, step), controllability (controllable, uncontrollable), normality (normal, abnormal), and more. Key points covered include definitions of direct costs, indirect costs, fixed costs, variable costs, product costs, period costs, and common/joint costs.
theory of production ( EEM PPT / SEM 4 GTU )tejaspatel1997
The document provides information about the theory of production and the factors of production.
It begins with an introduction to the theory of production, defining it as the process of converting inputs into outputs. It then discusses the production function and how it represents the relationship between inputs and outputs.
The main body of the document is dedicated to explaining the four factors of production: land, labor, capital, and entrepreneurship. It provides examples and definitions for each factor.
The document concludes by discussing some concepts that influence entrepreneurial decision making, such as scarcity, opportunity cost, and productivity. It emphasizes how entrepreneurs must use resources efficiently to maximize profits.
This document provides an overview of key concepts in industrial economics including:
1. It discusses micro and macro economics, and defines industrial economics as dealing with economic problems of firms and industries.
2. Some key concepts covered include production functions, costs, revenues, and market structures like monopoly and price discrimination.
3. Laws of production like returns to scale and variable proportions are explained, as well as cost concepts like total, average, and marginal costs.
The document discusses cost theory and concepts. It provides definitions of key cost terms like fixed costs, variable costs, total costs, average costs, and marginal costs. It explains the relationships between these costs and output levels in the short run. Fixed costs remain constant while variable costs and total costs increase with output in the short run. The total, average, and marginal cost curves are U-shaped in the short run.
This document discusses various cost concepts that are relevant for business operations and decision making. It groups the concepts into accounting cost concepts and analytical cost concepts. Some key accounting cost concepts discussed include opportunity cost vs actual cost, business cost vs full cost, explicit vs implicit cost, and out-of-pocket vs book cost. Analytical cost concepts discussed include fixed vs variable cost, total/average/marginal cost, short-run vs long-run cost, incremental vs sunk cost, historical vs replacement cost, and private vs social cost.
This document discusses key concepts in cost accounting. It defines costs as values of resources that go into producing goods and services. It outlines the main elements of cost including direct and indirect materials, direct and indirect labor, and various overhead costs. It also classifies costs according to different criteria such as behavior, function, and management. The purpose of cost accounting is explained as providing internal reporting for management and external reporting for financial statements. The importance of cost accounting to various stakeholders like workers, government, and customers is also highlighted.
Meaning of Cost Analysis
Basic Cost Concept
Basic concept of financial Accounting/ Accounting Rules-Problems
Depreciation
Methods of Depreciation -Problems
Break Even Analysis
Marginal Uses of BEA
This document discusses cost concepts relevant for production planning and decision making. It defines different types of costs such as explicit vs implicit costs, direct vs indirect costs, private vs social costs, relevant vs irrelevant costs, economic vs accounting costs, separable vs common costs, and fixed vs variable costs. It also explores the relationship between production and costs, discussing how cost functions are related to production functions and how average and marginal costs are related to average and marginal products. Short-run cost functions are examined, showing how total, average, and marginal costs change at different output levels when some factors are fixed in the short-run.
This document provides an introduction to finance and cost accounting. It discusses key concepts in finance such as studying monetary assets and managing project risks. It then defines cost accounting and explains how it is used to examine finances and improve profitability. The document outlines various cost accounting techniques like cost ascertainment and cost control that are used to calculate, analyze, and reduce costs. It also discusses the advantages of cost accounting in providing cost data for pricing, controlling materials, and evaluating profitable activities.
Nature And Theories In Management AccountingLisa Williams
This document discusses cost accounting, its role, and ethical considerations. It begins by defining cost accounting as a subset of managerial accounting that helps determine and accumulate product, process, or service costs. It then discusses the role of cost accounting in planning, decision making, and performance evaluation. Finally, it discusses some ethical issues that can arise in cost accounting, such as lack of understanding leading to manipulation, and the need to provide truthful information to users. It also briefly compares absorption and variable costing approaches.
Business Economics - Unit-4 - Osmania UniversityBalasri Kamarapu
This document provides an overview of cost concepts and classifications that are important for business economics. It discusses different types of costs such as direct costs, indirect costs, fixed costs, and variable costs. It also covers cost classifications based on nature, relation to cost centers, functions, behavior, management decision making, production process, and time. Key cost concepts explained include total costs, average costs, marginal costs, opportunity costs, and sunk costs. Cost classification is presented as a logical process to categorize costs according to their features to aid accounting and economic analysis.
This document discusses production and costs at the firm level. It begins by defining firms and their objectives to maximize profits. It then explores the production process, explaining that firms use inputs like labor and capital to produce outputs. It discusses the economists' view of costs, distinguishing between explicit costs and implicit opportunity costs. It also explains the differences between accounting profits, economic profits, and normal profits. The document then examines production functions and the laws of diminishing and increasing returns to scale in both the short-run and long-run. It provides graphs and examples to illustrate these concepts.
This document outlines the objectives, outcomes, syllabus, and key concepts for the course "Cost and Management Accounting". The objectives are to impart knowledge about using financial data for managerial planning, control, and decision making. Key concepts covered include ratio analysis, budgeting, standard costing, marginal costing, and differences between cost accounting and management accounting. The syllabus is divided into four units covering topics such as financial statement analysis, variance analysis, budgetary control, and cost-volume-profit analysis. Key terminology around types of costs, cost concepts, and ratio analysis are also defined.
The document provides an overview of cost accounting concepts. It defines cost accounting as the process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information to permit informed judgments and decisions by users of the information. It discusses the objectives, scope, importance and limitations of cost accounting. It also covers the classification of costs based on different criteria such as nature, variability, controllability, and managerial functions. The document provides examples and explanations of key cost accounting terms and concepts.
This document provides an introduction to cost accounting. It defines cost accounting as the process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information to permit informed judgments and decisions by users of the information. It discusses the differences between cost accounting, financial accounting, and management accounting. Key aspects of cost accounting covered include objectives, scope, importance, limitations, and classifications of costs based on nature, variability, component, controllability, and managerial function. The document also provides examples to illustrate different types of costs.
The document discusses key concepts related to production, inputs, outputs, costs, and profit maximization. It defines production as using inputs to create outputs for consumption. Inputs are the resources that go into production like labor and materials. Outputs are the finished items produced. It also discusses the differences between labor intensive versus capital intensive production, short run versus long run time periods, production functions, and the concepts of total, average, and marginal products and costs. Profit maximization refers to a tendency of businesses to maximize profits by equalizing marginal costs and revenues.
1. The document discusses various cost concepts that are important for managerial decision making including opportunity costs, explicit vs implicit costs, historical vs replacement costs, fixed vs variable costs, and short-run vs long-run costs.
2. It explains the relationship between total, average, and marginal costs in both the short-run and long-run. In the short-run, total fixed costs remain fixed while variable costs change with output. In the long-run, all costs are variable.
3. Understanding the cost-output relationship is important for cost control, profit prediction, pricing, and other decisions. Cost is influenced by factors like scale of production, output level, input prices, and technology.
1. Managerial accounting provides information to managers inside a company to help with planning, controlling, and decision making, while financial accounting provides information to external parties like creditors and regulators.
2. There are two main formats for the income statement - the traditional format which classifies all costs as expenses, and the contribution format which separates costs into fixed and variable categories to help managers.
3. The contribution format shows contribution margin and is more useful for management decision making as it highlights the impact of changes in sales volume on operating income.
Management accounting provides information to management for planning, controlling, and decision making. It involves identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating financial information. Management accounting also includes preparing financial reports for external stakeholders. Cost accounting is a key part of management accounting and involves determining and tracking the costs of products, services, activities or resources.
Cost, volume, profit Analysis. for decision makingHAFIDHISAIDI1
Part 1 discusses different cost behaviors such as fixed, variable, and semi-variable costs. It also covers topics like direct vs indirect costs, marginal costing, and operational gearing.
Part 2 is about cost-volume-profit (CVP) analysis. It discusses how CVP is used to determine the break-even point and analyze how costs and profits are affected by changes in sales volume. The assumptions of CVP analysis and formulas for calculating the break-even point in terms of units and sales volume are also presented.
This document contains an assignment for a Managerial Economics course. It includes 5 questions related to concepts in managerial economics. Question 1 asks about the difference between a firm and an industry, and the equilibrium of a firm and industry under perfect competition. Question 2 asks about implicit and explicit costs and actual and opportunity costs. Question 3 provides data to calculate price elasticity of supply. Question 4 asks about monetary policy objectives and instruments. Question 5 explains the relationship between total revenue, average revenue, and marginal revenue under different market conditions.
Carrying costs include expenses related to holding inventory such as storage, maintenance, insurance, opportunity costs and losses from theft. Examples of carrying costs are money tied up in inventory, storage costs, insurance premiums, taxes, inventory obsolescence and spoilage. Contribution margin is a measure of profitability calculated as revenue minus variable costs. It can be used to analyze the ability of a product or company to cover variable costs. Conversion costs are manufacturing costs other than the costs of raw materials, such as direct labor and overhead required to transform raw materials into finished goods.
This document discusses profit analysis and break-even analysis. It defines accounting profit and economic profit, explaining that economic profit includes both explicit and implicit costs. Short-run profit is maximized using fixed inputs, while long-run profit allows variable inputs to change. Break-even analysis determines the sales volume needed for total revenue to equal total costs. The key components of profit analysis and assumptions of break-even analysis are described. Approaches to measuring profits and uses of break-even analysis are also summarized.
The document discusses key concepts in managerial economics including:
- Accounting costs consider explicit costs while economic costs consider both explicit and implicit costs.
- Fixed costs do not vary with production while variable costs do vary with production. Common fixed costs include rent and salaries while common variable costs are raw materials and labor.
- Average cost is total cost divided by output while marginal cost is the change in total cost from producing one additional unit of output.
- The relationship between average cost and marginal cost is that when marginal cost is diminishing, total cost increases at a diminishing rate, and when marginal cost is rising, total cost increases at an increasing rate. The lowest point of marginal cost corresponds to the minimum point of
This document provides an analysis of costs and revenues. It defines and explains various cost concepts including actual and opportunity costs, fixed and variable costs, as well as average, marginal, and total costs. Cost behavior in the short-run and long-run is examined. Revenue concepts such as total, average, and marginal revenue are also introduced. Learning curves and cost functions are discussed. The importance of understanding costs for business decision making is emphasized.
Walmart Business+ and Spark Good for Nonprofits.pdfTechSoup
"Learn about all the ways Walmart supports nonprofit organizations.
You will hear from Liz Willett, the Head of Nonprofits, and hear about what Walmart is doing to help nonprofits, including Walmart Business and Spark Good. Walmart Business+ is a new offer for nonprofits that offers discounts and also streamlines nonprofits order and expense tracking, saving time and money.
The webinar may also give some examples on how nonprofits can best leverage Walmart Business+.
The event will cover the following::
Walmart Business + (https://business.walmart.com/plus) is a new shopping experience for nonprofits, schools, and local business customers that connects an exclusive online shopping experience to stores. Benefits include free delivery and shipping, a 'Spend Analytics” feature, special discounts, deals and tax-exempt shopping.
Special TechSoup offer for a free 180 days membership, and up to $150 in discounts on eligible orders.
Spark Good (walmart.com/sparkgood) is a charitable platform that enables nonprofits to receive donations directly from customers and associates.
Answers about how you can do more with Walmart!"
Philippine Edukasyong Pantahanan at Pangkabuhayan (EPP) CurriculumMJDuyan
(𝐓𝐋𝐄 𝟏𝟎𝟎) (𝐋𝐞𝐬𝐬𝐨𝐧 𝟏)-𝐏𝐫𝐞𝐥𝐢𝐦𝐬
𝐃𝐢𝐬𝐜𝐮𝐬𝐬 𝐭𝐡𝐞 𝐄𝐏𝐏 𝐂𝐮𝐫𝐫𝐢𝐜𝐮𝐥𝐮𝐦 𝐢𝐧 𝐭𝐡𝐞 𝐏𝐡𝐢𝐥𝐢𝐩𝐩𝐢𝐧𝐞𝐬:
- Understand the goals and objectives of the Edukasyong Pantahanan at Pangkabuhayan (EPP) curriculum, recognizing its importance in fostering practical life skills and values among students. Students will also be able to identify the key components and subjects covered, such as agriculture, home economics, industrial arts, and information and communication technology.
𝐄𝐱𝐩𝐥𝐚𝐢𝐧 𝐭𝐡𝐞 𝐍𝐚𝐭𝐮𝐫𝐞 𝐚𝐧𝐝 𝐒𝐜𝐨𝐩𝐞 𝐨𝐟 𝐚𝐧 𝐄𝐧𝐭𝐫𝐞𝐩𝐫𝐞𝐧𝐞𝐮𝐫:
-Define entrepreneurship, distinguishing it from general business activities by emphasizing its focus on innovation, risk-taking, and value creation. Students will describe the characteristics and traits of successful entrepreneurs, including their roles and responsibilities, and discuss the broader economic and social impacts of entrepreneurial activities on both local and global scales.
This document provides an overview of wound healing, its functions, stages, mechanisms, factors affecting it, and complications.
A wound is a break in the integrity of the skin or tissues, which may be associated with disruption of the structure and function.
Healing is the body’s response to injury in an attempt to restore normal structure and functions.
Healing can occur in two ways: Regeneration and Repair
There are 4 phases of wound healing: hemostasis, inflammation, proliferation, and remodeling. This document also describes the mechanism of wound healing. Factors that affect healing include infection, uncontrolled diabetes, poor nutrition, age, anemia, the presence of foreign bodies, etc.
Complications of wound healing like infection, hyperpigmentation of scar, contractures, and keloid formation.
Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
Leveraging Generative AI to Drive Nonprofit InnovationTechSoup
In this webinar, participants learned how to utilize Generative AI to streamline operations and elevate member engagement. Amazon Web Service experts provided a customer specific use cases and dived into low/no-code tools that are quick and easy to deploy through Amazon Web Service (AWS.)
Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
LAND USE LAND COVER AND NDVI OF MIRZAPUR DISTRICT, UPRAHUL
This Dissertation explores the particular circumstances of Mirzapur, a region located in the
core of India. Mirzapur, with its varied terrains and abundant biodiversity, offers an optimal
environment for investigating the changes in vegetation cover dynamics. Our study utilizes
advanced technologies such as GIS (Geographic Information Systems) and Remote sensing to
analyze the transformations that have taken place over the course of a decade.
The complex relationship between human activities and the environment has been the focus
of extensive research and worry. As the global community grapples with swift urbanization,
population expansion, and economic progress, the effects on natural ecosystems are becoming
more evident. A crucial element of this impact is the alteration of vegetation cover, which plays a
significant role in maintaining the ecological equilibrium of our planet.Land serves as the foundation for all human activities and provides the necessary materials for
these activities. As the most crucial natural resource, its utilization by humans results in different
'Land uses,' which are determined by both human activities and the physical characteristics of the
land.
The utilization of land is impacted by human needs and environmental factors. In countries
like India, rapid population growth and the emphasis on extensive resource exploitation can lead
to significant land degradation, adversely affecting the region's land cover.
Therefore, human intervention has significantly influenced land use patterns over many
centuries, evolving its structure over time and space. In the present era, these changes have
accelerated due to factors such as agriculture and urbanization. Information regarding land use and
cover is essential for various planning and management tasks related to the Earth's surface,
providing crucial environmental data for scientific, resource management, policy purposes, and
diverse human activities.
Accurate understanding of land use and cover is imperative for the development planning
of any area. Consequently, a wide range of professionals, including earth system scientists, land
and water managers, and urban planners, are interested in obtaining data on land use and cover
changes, conversion trends, and other related patterns. The spatial dimensions of land use and
cover support policymakers and scientists in making well-informed decisions, as alterations in
these patterns indicate shifts in economic and social conditions. Monitoring such changes with the
help of Advanced technologies like Remote Sensing and Geographic Information Systems is
crucial for coordinated efforts across different administrative levels. Advanced technologies like
Remote Sensing and Geographic Information Systems
9
Changes in vegetation cover refer to variations in the distribution, composition, and overall
structure of plant communities across different temporal and spatial scales. These changes can
occur natural.
How to Make a Field Mandatory in Odoo 17Celine George
In Odoo, making a field required can be done through both Python code and XML views. When you set the required attribute to True in Python code, it makes the field required across all views where it's used. Conversely, when you set the required attribute in XML views, it makes the field required only in the context of that particular view.
1. 1
Mr. R S Ch Murthy Chodisetty
M.Com., MBA (HR)., MBA (FIN)., (PhD).
Faculty of Management, Sreenidhi Institute of Science and Technology,
Hyderabad, Telangana.
2
3. 3
Concept of Production:
It a manufacturing process
It’s a process of different commodities
Its includes Raw material, Work in progress & finished goods.
Product
Productivity
production
4. 4
CONCEPT OF PRODUCTION:
® Production is an activity of transforming the inputs in to output
® Production involves step-by-step conversion of one form material in to
another form through mechanical process
5. 5
Meaning & Definition:
According to ES Buffa “Production is a process by which goods and services
are created.”
In economics “the term production means a process in which the resources
are transferred or converted in to a different and more usually commodities.”
In general production means “Transforming inputs in to an output. Its
however limited to manufacturing organization.”
6. 6
TYPES OF PRODUCTION FUNCTIONS:
1.Short run production function
2.Long run production function
7. 7
Short run production function:
Q= f (L,C,M)
Q = quantity of output produced
L = Labor units
C = Capital employed
M = Material
F = Function
8. 8
Long run production function:
Q= f (Ld L,C,M,T,t)
Q = quantity of output produced
Ld = Land and building
L = Labor units
C = Capital employed
M = Material
T = Technology
t = Time period of production
F = Function
9. 9
Cobb Douglas production functions:
It was introduced by Charles W. cobb and Paul H. douglas in the 1920s. They
suggested a production function of the form..
Q = A, Lb K 1-b
Q= quantity of the out put produced
A= constant
L= Labor units
K= Capital units
b = Parameters
10. 10
Marginal Rate of Technical Substitutions:
he marginal rate of technical substitution (MRTS) is the rate at which one
factor must decrease so that the same level of productivity can be maintained
when another factor is increased. The MRTS reflects the give-and-take
between factors, such as capital and labor, that allow a firm to maintain a
constant output.
11. 11
Isoquant curve:
®The term Isoquant has its origin from two words iSo and qUantus.
®iSo is a greek word meaning equal and quantus is Latin word meaning
quantity.
®An isoquant curve is therefore called iso-product curve or production in
difference curve.
12. 12
Types of iso quants:
Basically 3 types
®Linear iso quant
®L-shape iso quant
®Kinked iso quant
13. 13
Iso cost curve:
® Iso cost curve refers to that cost curve which will be show the various
commodities of two inputs which can be purchased with a given amount of
total money.
® In the Below diagram it can be seen that as the level of production changes.
The total cost will change and automatically the iso cost curve moves
upward.
14. 14
Law of Returns to scale:
® The behavior of output when the varying quantity of one input is
combined with a fixed quantity of the other can be categorized in to 3
stages
® The law of returns to scale can be designed as the percentage of increase
in the output where all the inputs vary in the same proportion
® The law of return to scale refers to the relationship between inputs and
outputs in the long run when all the inputs (both fixed & variable) are
varied same proportion
16. 16
Law of Returns to scale-Types:
Increasing returns to scale occurs when a percentage increase in inputs lead
to a greater percentage increase in the output.
eg. If a 5% increase in inputs results in 10% increase in the output, an
organization is to attain increase returns
Constant returns to scale if occur an when the percentage in the output is
equal to the percentage of increase in inputs.
eg. If the inputs are increase at 10% and if the result output also increase
at 10%
Decreasing returns to scale If the proportionate increase is less then
proportionate increase in the out put then a situation is called decreasing
returns.
eg. If the inputs are increase at 10% and if the result output also increase
at 5%
21. 21
Internal Or Real Economies :
1. Economies in production
2. Economies in Marketing
3. Managerial Economies
4. Economies in Transport & Storage
22. 22
External Or Pecuniary Economies :
1. Large scale of purchase of Raw material
2. Large scale equation of external finance
3. Massive Advt.
4. Establishment of transport & warehouse
23. 23
Types of Cost analysis:
1. Actual cost
2. Opportunity cost
3. Sunk cost
4. Incremental cost
5. Explicit cost
6. Implicit cost or imputed cost
7. Book cost
8. Out of pocket cost
9. Accounting cost
10. Economic cost
24. 24
Types of Cost analysis:
1. Direct cost
2. Controllable cost
3. Non-controllable cost
4. Historical cost or Replacement cost
5. Shut down cost
6. Abandonment cost
7. Urgent cost and postponement cost
8. Business cost and full cost
9. Fixed cost
10. Variable cost
25. 25
Types of Cost analysis:
1. Total cost
2. Average cost
3. Marginal cost
4. Short-run cost
5. Long run cost
6. AVC, AFC, ATC
26. 26
ACTUAL COST:
Actual cost is defined as the cost or expenditure which a firm incurs for
producing or acquiring a good or service. The actual costs or expenditures
are recorded in the books of accounts of a business unit. Actual costs are
called as “Out lay Costs” or “Absolute Costs”
Eg. Cost of Raw material, wages, salaries (production)
27. 27
OPPORTUNITY COST:
opportunity cost is concerned with the cost of forgone
opportunities/alternatives. In other words, it is the return from the second
best use of the firms resources which the firm forgoes in order to avail of the
return from the best use of the resources.
Eg. Own land and building of the company or firm
28. 28
SUNK COST:
Sunk costs are those do not alter by varying the nature or level of business
activity. Sunk costs are generally not taken into consideration in decision
making as they do not vary with the changes in the future. Sunk costs are a
part of the outlay/actual costs. sunk costs areas “non-avoidable costs”. Or
“non-escapable costs”.
Eg. All the past costs are considered as sunk costs. The best example is
amortization of past expenses, like depreciation
29. 29
INCREMENTAL COST:
Sunk costs are those do not alter by varying the nature or level of business
activity. Sunk costs are generally not taken into consideration in decision
making as they do not vary with the changes in the future. Sunk costs are a
part of the outlay/actual costs. sunk costs areas “non-avoidable costs”. Or
“non-escapable costs”.
Eg. Change in distribution channel adding or deleting a product in the
product line, replacing a machinery
30. 30
EXPLICIT COST :
Explicit costs are those expenditures that are actually paid by the by the firm.
Those costs are recorded in the books of accounts. Explicit costs are
important for calculating the profit and loss accounts and guide in economic
decision making. Its are also called paid up costs
Eg. Interest payment on borrowed funds, rent payment, wages paid
31. 31
IMPLICIT OR IMPUTED COST:
Explicit costs are those expenditures that are actually paid by the by the
firm. Those costs are recorded in the books of accounts. Explicit costs are
important for calculating the profit and loss accounts and guide in economic
decision making. Its are also called paid up costs
Eg. Rent on idle time, depreciation on fully depreciated property still in
use, interest on equity capital.
32. 32
BOOK COSTS :
Book costs are those costs which don’t involve any cash payments but a
provision is made in the books of accounts in order to include them in the
profit and loss account and take tax advantages, like provision for
depreciation and unpaid amount of Interest on the owners capital
33. 33
OUT OF POCKET COST :
Out of pocket costs are those costs or expenses which are current payments
to the outsiders of the firm. All the explicit costs fall into the category of out
of pocket costs.
Eg. Rent paid, wages, Transport charges and salaries
34. 34
ACCOUNTING COSTS :
Accounting costs are the actual or out lay costs that point out the amount of
expenditure that has already been incurred on a particular process or on
production as such accounting costs facilitate for managing the taxation
needs and profitability of the firm
Eg. All sunk costs are accounting costs.
35. 35
ECONOMIC COSTS :
Economic costs are related to future. They play a vital role in business
decisions as the costs considered in decision making are usually future costs.
they have the nature similar to that incremental imputed, explicit and
opportunity costs.
36. 36
DIRECT COSTS:
Direct costs are those which have direct relationship with a unit of operation
like manufacturing a product, organization a process of an activity et. In
other words, direct costs are those which are directly and definitely
identifiable.
Eg. In operating railway services, the costs of wagons, coaches and
engines are direct costs.
37. 37
IN DIRECT COSTS :
Indirect costs are those which cannot be easily and definitely identifiable in
relation to a plant, a product, a process or a department. Like the direct costs
indirect costs, do not vary means they may or may not be variable in nature.
Eg. Factory building, The track of railway system
38. 38
CONTROLLABLE COSTS :
Controllable costs are those which can be controlled or regulated through
observation by an executive and therefore they can be used for assessing the
efficiency of the executive. Most of the costs are controllable.
Eg. Inventory costs can be controlled at the shop level
39. 39
NON CONTROLLABLE COSTS :
Non Controllable costs are those which can not be subjected to
administrative control and supervision are called non controllable costs.
Eg. Costs due obsolesce and depreciation, capital costs.
40. 40
HISTORICAL COST & REPLACEMENT COST :
Historical cost (Original cost) of an asset refers to the original price paid by
the management to purchase it in the past. Whereas the Replacement cost
refers to the cost that a firm incurs to replace or acquire the same asset now.
The distinction between the historical cost and the replacement cost result
from the changes of prices over time.
Eg. If a firm acquires a machine for rs.20,000 in the year 1990 and the
same machine cost of rs.40,000 now. The amount of rs.20,000 is the
historical cost and the amount of rs.40,000 is the replacement cost.
41. 41
SHUT DOWN COSTS :
The costs which a firm incurs when it temporarily stops its operations are
called “shutdown costs”. These costs can be saved when the firm again starts
its operations. Shutdown costs include fixed costs, maintenance cost, lay-off
expenses etc..
42. 42
ABANDONMENT COSTS :
Abandonment costs are those costs which are incurred for the complete
removal of the fixed assts from use. These may occur due to obsolesce or
due to improvisation of the firm. Abandonment costs thus involve problem
of disposal of the assts
43. 43
URGENT COST AND POST PONABLE C:
Urgent costs are those costs which have to be incurred compulsorily by the
management in order to continue its operations.
Eg. Costs of material, labor, fuel
Post ponable costs are those which if not incurred in time do of effect
the operational efficiency of the firm
Eg. Maintenance of costs
44. 44
BUSINESS COSTS & FULL COSTS :
Business costs include all the expenses incurred by the firm to carry out
business activities. According to Watson and Donald “Business costs include
all the payments and contractual obligations made by the firm
Eg. Income tax, profit & loss
Full costs include business costs, opportunity costs and normal profit.
Opportunity cost is the expected return /earnings form the next best use of
the firm.
45. 45
FIXED COSTS :
Fixed costs are the costs that do not vary with the changes in output. In other
words, fixed costs are those which are fixed in volume though there are
variations in the output level.
Eg. Expenditures on depreciation costs of administrative or managerial
staff, rent on land and building and property tax etc.
46. 46
VARIABLECOSTS :
Variable costs are those that are directly dependent on the output i.e. they
vary with the variation in the volume / level of output. Variable costs
increase with an increase in output level but not necessarily in the same
proportion.
Eg. Cost of raw material, expenditures on labor, running cost or
maintenance costs of fixed assets.
47. 47
TOTAL COST :
Total cost refers to the money value of the total resources required for the
production of goods and services by the firm. In other words, it refers to the
total outlays of money expenditure, both explicit and implicit.
TC = VC+FC
TC = Total cost
VC = Variable cost
FC = Fixed cost
48. 48
AVERAGE COST :
It refers to the cost per unit of output assuming that production of each unit
of output incurs the same cost. It is statistical in nature and is not an actual
cost. It is obtained by dividing Total cost.
49. 49
MARGINAL COST :
MC refers to the incremental or additional costs that are incurred when
there is an addition to the existing output level of goods and services, in
other words it is the addition to the total cost on account of producing
addition units of the output
MC = TC (n+1)
MC = Marginal cost
TCn = Total cost before addition of units
TC(n+1) = Total cost after addition
n = Number of units of output
50. 50
SHORT RUN COST AND LONG RUN COST :
Short run costs: these costs are which vary with the variations in the
output with size of the firm as same. Short run costs are same as variable
costs.
Long run costs: these costs are which incurred on the fixed assets like land
and building, plant and machinery etc. long run costs are same as fixed costs.
51. 51
BREAK EVEN ANALYSIS:
The Break – Even point can be defined as that level of sales at which total
revenue equals total costs and the net income is equal to zero. This is also
known as no-profit and no-loss point.
Break-even analysis is a technique widely used by production management
and management accountants. ... Total variable and fixed costs are compared
with sales revenue in order to determine the level of sales volume, sales
value or production at which the business makes neither a profit nor a loss
(the "break-even point").
53. 53
ADVANTAGES OF BEP:
1. To achieve a given amount of profit the break even analysis can be used to
determine the sales volume.
2. It can be used to forecast the future cost and revenue and it can predict the
profit.
3. To control the cost in business the cost functions used in break even analysis
can be useful.
4. The break even analysis useful for profit planning in business.
5. The break even analysis can be useful in sales projection.
54. 54
ADVANTAGES OF BEP:
1. To achieve a given amount of profit the break even analysis can be used
to determine the sales volume.
2. It can be used to forecast the future cost and revenue and it can predict
the profit.
3. To control the cost in business the cost functions used in break even
analysis can be useful.
4. The break even analysis useful for profit planning in business.
5. The break even analysis can be useful in sales projection.
56. 56
6. BEP (in units) = Fixed cost/Contribution per unit
7. BEP (in rupees) = Fixed cost X Sales / Sales- VC
8. Margin of safety = Total sales – BEP Sales
9. Variable cost = Sales – fixed cost
10. Profit = (Sales x P/V Ratio) – F
= P/V Ratio x M/S Ratio x Sales