Ppt for economics
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The document defines several types of costs related to production including: 1) Money cost, which is the amount spent in money terms for production. 2) Real cost, which includes mental and physical sacrifices made during production. 3) Explicit cost, which are actual cash payments made for factor and non-factor inputs. 4) It also distinguishes between fixed costs that remain constant regardless of output, and variable costs that vary with output. Total cost is the sum of fixed and variable costs.
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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.
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Cost concepts and behaviours
The document discusses various cost concepts including:
- Real cost refers to the actual quantities of factors used in production, while money cost expresses costs in monetary terms.
- Explicit costs are actual expenses paid by the firm, while implicit costs are theoretical expenses not captured in accounting.
- Fixed costs remain constant regardless of output levels, while variable costs fluctuate with output.
- Historical cost refers to the original price paid, while replacement cost is the current price to acquire the same assets.
- Private costs affect individual firms, while social costs impact society as a whole.
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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.
Cost concepts
The document discusses various cost concepts and classifications including:
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- Cost classifications such as functional (materials, labor, overhead) and behavioral (fixed, variable) costs
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- Different cost behavior patterns such as total fixed costs, committed fixed costs, total variable costs, total mixed costs, and total step costs
- Methods for separating mixed costs into fixed and variable components
- The impact of computers on manufacturing through technologies like automatic identification systems, computer-aided design, computer-aided manufacturing, flexible manufacturing systems, and computer-integr
Cost classification
This document discusses various ways to classify costs, including by nature, function, traceability, behavior, and relevance to decision making. It defines different types of costs such as direct and indirect materials, direct and indirect labor, variable and fixed costs, and relevant versus irrelevant costs. It provides examples to illustrate concepts like direct versus indirect costs, variable versus fixed costs, and relevant versus irrelevant costs in decision making.
Cost concept
This document discusses various cost concepts relevant to business operations and decisions. It groups the concepts into two categories: 1) accounting cost concepts used for accounting purposes and 2) analytical cost concepts used for economic analysis. Some key concepts discussed include opportunity cost vs actual cost, fixed vs variable cost, total vs average vs marginal cost, short-run vs long-run cost, historical vs replacement cost, and private vs social cost.
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The document defines and explains different types of costs that are relevant for businesses. It discusses money costs and implicit costs, economic costs and opportunity costs, real costs and private and social costs. It also covers original costs and replacement costs. Finally, it explains fixed costs and variable costs, as well as average costs and marginal costs.
Cost concepts and behaviours
The document discusses various cost concepts including:
- Real cost refers to the actual quantities of factors used in production, while money cost expresses costs in monetary terms.
- Explicit costs are actual expenses paid by the firm, while implicit costs are theoretical expenses not captured in accounting.
- Fixed costs remain constant regardless of output levels, while variable costs fluctuate with output.
- Historical cost refers to the original price paid, while replacement cost is the current price to acquire the same assets.
- Private costs affect individual firms, while social costs impact society as a whole.
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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.
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- Fixed vs direct vs variable costs and functional vs behavioral costs
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- Different cost behavior patterns such as total fixed costs, committed fixed costs, total variable costs, total mixed costs, and total step costs
- Methods for separating mixed costs into fixed and variable components
- The impact of computers on manufacturing through technologies like automatic identification systems, computer-aided design, computer-aided manufacturing, flexible manufacturing systems, and computer-integr
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This document provides an overview of different types of costs that are relevant for business. It defines key cost terms like actual cost, opportunity cost, sunk cost, incremental cost, explicit cost, implicit cost, book cost, 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. Examples are provided for most cost types.
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Businesses have both fixed and variable costs. Fixed costs remain the same regardless of production levels, such as rent expenses. Variable costs change based on production, such as materials. Total costs are the sum of fixed and variable costs. Average cost is calculated by dividing total costs by units produced to determine per unit costs. Graphs can show how total costs and average costs change as production increases or decreases.
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Costs are necessary expenses for a business and are categorized as either variable or fixed. Variable costs change directly with production levels, increasing as production increases and decreasing as production decreases. Fixed costs remain the same regardless of the production level and include expenses like rent and loan interest. The total costs of a business are the sum of total variable costs and total fixed costs.
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This document discusses different types of costs that producers consider, including total, average, and marginal costs. It defines fixed costs as those that do not vary with output, and variable costs as those that do vary with output. Total costs are the sum of fixed and variable costs. The document provides examples of accounting costs, which are retrospective, versus economic costs, which consider future and opportunity costs. It also distinguishes between explicit costs, which are actual expenses, and implicit costs, which are the value of owned inputs. Finally, it outlines the components of short-run cost analysis, including formulas for average fixed cost, average variable cost, average total cost, and marginal cost.
Classification of cost
* Beginning raw materials inventory: $32,000
* Raw materials purchased: $276,000
* Ending raw materials inventory: $28,000
* Raw materials available for use: $32,000 + $276,000 = $308,000
* Raw materials used: Raw materials available - Ending inventory = $308,000 - $28,000 = $280,000
The cost of direct material used is $280,000.
The answer is C.
material was still present. What is the cost of
direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2
Concept of costs
This document discusses different concepts of cost accounting including costs related to income measurement, profit planning, control, and decision making. It defines key costing terms like product costs, period costs, fixed costs, variable costs, relevant and irrelevant costs, incremental and differential costs, opportunity costs, and imputed costs. The overall purpose is to explain how costs are classified and used for different accounting and business objectives.
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This document provides an overview of marginal costing. It defines marginal costing as a technique that differentiates between fixed and variable costs to determine the effect of changes in volume or output on profit. Marginal cost is defined as the additional cost of producing one more unit. The key features, assumptions, and advantages of marginal costing are outlined, including how it is used for decision making, cost control, and determining profitability. Formulas for calculating break-even point, margin of safety, and other metrics using marginal costing are also presented.
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The document discusses costing and pricing methods for a cooperative. It provides information on calculating costs, including material costs, labor costs, expenses, overhead, and the different components and types of costs. The document then outlines 10 steps for costing products, which include calculating raw materials, labor expenses, direct and indirect costs, total product cost, producer's price, and retail price. It discusses working backwards from the retail price to determine the ex-works or FOB price. The goal is to help the cooperative assess its current pricing practices and implement improved costing and pricing methods.
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This document provides an overview of cost classification. It defines cost and outlines several ways costs can be classified, including by function, nature/elements, ease of traceability, timing, behavior, and relevance to decision making. Specifically, it discusses classifying costs as manufacturing vs non-manufacturing, material vs labor vs expenses, direct vs indirect, variable vs fixed vs mixed. Examples are provided for each classification.
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Businesses have both fixed and variable costs. Fixed costs remain the same regardless of production levels, such as rent expenses. Variable costs change based on production, such as materials. Total costs are the sum of fixed and variable costs. Average cost is calculated by dividing total costs by units produced to determine per unit costs. Graphs can show how total costs and average costs change as production increases or decreases.
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Marginal costing is a technique that focuses only on variable costs when calculating the cost of producing a product or service. It excludes fixed costs from the calculation. Under marginal costing, inventory is valued at variable cost rather than total cost. Marginal costing is useful for decision making, determining the breakeven point, and showing the contribution margin of each product. However, it can provide misleading results by ignoring fixed costs and is not suitable for large, long-term industries.
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This document defines and provides examples of different types of costs that can be classified based on various criteria. It discusses costs in terms of elements like material, labor, and expenses. It also categorizes costs based on factors such as nature, variability, controllability, normality, function, time, and relevance to decision making. Direct and indirect costs are defined, as well as fixed, variable, and semi-variable costs. Production, administration, selling, and distribution costs are also outlined.
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Note: All expenses are costs,but not all costs are expenses.
Cost does not include the mark-up for profit.
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This document discusses different types of costs that producers consider, including total, average, and marginal costs. It defines fixed costs as those that do not vary with output, and variable costs as those that do vary with output. Total costs are the sum of fixed and variable costs. The document provides examples of accounting costs, which are retrospective, versus economic costs, which consider future and opportunity costs. It also distinguishes between explicit costs, which are actual expenses, and implicit costs, which are the value of owned inputs. Finally, it outlines the components of short-run cost analysis, including formulas for average fixed cost, average variable cost, average total cost, and marginal cost.
Classification of cost
* Beginning raw materials inventory: $32,000
* Raw materials purchased: $276,000
* Ending raw materials inventory: $28,000
* Raw materials available for use: $32,000 + $276,000 = $308,000
* Raw materials used: Raw materials available - Ending inventory = $308,000 - $28,000 = $280,000
The cost of direct material used is $280,000.
The answer is C.
material was still present. What is the cost of
direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2
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This document discusses different concepts of cost accounting including costs related to income measurement, profit planning, control, and decision making. It defines key costing terms like product costs, period costs, fixed costs, variable costs, relevant and irrelevant costs, incremental and differential costs, opportunity costs, and imputed costs. The overall purpose is to explain how costs are classified and used for different accounting and business objectives.
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This document provides an overview of marginal costing. It defines marginal costing as a technique that differentiates between fixed and variable costs to determine the effect of changes in volume or output on profit. Marginal cost is defined as the additional cost of producing one more unit. The key features, assumptions, and advantages of marginal costing are outlined, including how it is used for decision making, cost control, and determining profitability. Formulas for calculating break-even point, margin of safety, and other metrics using marginal costing are also presented.
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theory of cost perfect.pptx
This document discusses the concept and types of cost. It defines cost as expenses incurred in supplying goods and services. It outlines 10 types of costs including opportunity cost, direct vs indirect cost, fixed vs variable cost, sunk vs incremental cost. It also discusses cost functions and how factors like output, input prices, technology impact cost. Finally, it examines the cost-output relationship in the short-run and long-run, including graphs of total, average and marginal cost curves in the short-run and long-run average cost curves.
Cost and BEA
This document discusses cost concepts and break-even analysis. It defines different types of costs such as explicit, implicit, fixed, and variable costs. It also explains the concepts of normal profit, incremental costs, sunk costs, and private and social costs. The document then provides an introduction to break-even analysis, discussing how to calculate the break-even point, total revenue, total costs, and profit or loss. It demonstrates using an example how to determine the number of units that must be sold to break even. The document concludes by discussing the uses and limitations of break-even analysis.
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Ppt for economics
- 1. BRANCH AND ENROLLMENT NUMBER: MBA IST SEM. BATCH 2019 (519)
- 3. It is the firm of the individual operating in a marketing has a influence on the market supply of the commodity. In order to make use of the various factor and non-factor inputs In common, the amount spend on these inputs is called the cost of production
- 4. MONEY COST : The amount spend in terms of money for the production of the commodity is known as money cost . NOMINAL COST: It is the money cost of production. REAL COST : It is the mental and physical and sacrifices undergone with a view to producing a commodity .
- 5. The real concept of production of given commodity is the next best alternative sacrificed in order to obtain that commodity.
- 6. It is the cost of self-owned resources such as salary of proprietor XPLICIT COST : It is the paid-out cost. It means payments made for the productive resources purchased
- 7. Cash payments which firms make for factor and non-factor input depreciation other book keeping entries. SOCIAL COST: It is the amount of cost the society bears due to industrialization. ENTREPRENEUR’S COST: The cost of production in the sense of money cost or expenses of production.
- 8. PRODUTION COST. SELLING COST. OTHER COST. MANAGERIAL COST.
- 9. WAGES. INTEREST. RENT. COST OF RAW MATERIALS. REPLACEMENT AND REPAIRING. DEPRICIATION. PROFITS .
- 10. In the short run at least one factor of production is fixed. Output can be varied only by adding more variable factors.
- 11. Some costs vary more proportionately with the output, while others are fixed and do not vary output in the same way. SUPPLEMENTARY COSTS: Some costs vary less proportionately with the output, while others are fixed and do not vary output in the same way. :
- 12. Remains constant. Also known as short-run cost. This cost includes: Cost on managerial staff. *Expenditure on depreciation. *Maintenance cost of the factory.
- 13. Vary directly with the level of output Used in the actual production process. Functions of output changes. Eg: Cost of raw-materials. Cost in direct labour .
- 14. Sum of total fixed cost and total variable cost. TC=TVC+TFC. TVC=0, when the output is zero and increases with increase in the output
- 15. They are of three types. Average fixed cost. Average variable cost. Average total cost.
- 16. AVERAGE FIXED COST: It is the per-unit cost of the fixed factors.AFC=TFC/Q. AVERAGE VARIABLE COST: It is the per-unit cost of the variable factors. AVC=TVC/Q.
- 17. It is the total cost divided by the number of units produced. Sum of average fixed cost and average variable cost. ATC=TC/Q. AC=AFC+AVC .
- 20. Change in the total cost resulting from the unit change in the quantity produced. MC=Change in Q/Change in TC.
- 22. It is a period of time during which the quantities of all factors, variable as well as fixed can be adjusted
- 23. Slopes downwards. Larger scope of specialization of labour. Increasing use of specialized machinery. Other technological management .
- 24. Cuts the LRAC at the lowest point. It is equal to the LRAC when LAC is neither rising nor falling
- 25. THANK YOU