PROJECT ON COSTS

SANKET JAGARE SNEHAL BHISE BRIJESH GUPTA POOJA BIST SUMEET POKHARE

It refers to any expenditure incurred by a firm or an individual. Profit maximization & cost minimization is main objective of the firm. Cost concept helps in choosing the alternative which satisfies the above condition.

SUNK COST IMPLICIT COST EXPLICIT COST LONG-RUN COST OPPURTINITY COST.

CONCEPT EXAMPLES

ALSO CALLED AS IMPLIED COST. RESULTS FROM USING ASSET INSTEAD OF RENTING , SELLING OR LENDING. ALSO IMPLIES TO FORGONE INCOME FROM CHOOSING

NOT TO WORK REPRESENTED BY LOST OPPURTUNITY IN USE OF COMPANYS OWN RESOURCES EXCLUDING CASH. INTANGIBLE COST NOT ACCOUNTED.

THE TIME AND EFFORT THAT THE OWNER PUTS IN MAINTAINING COMPANY RATHER THAN EXPANSION

A direct expense that a business incurs in conducting an activity. E.g salaries, wages, materials, etc. An explicit cost is an easily accounted cost, such as wage, rent and materials. Explicit cost are those which the entrepreneur has to pay from his own pocket.

ABC CO. IS INTO TEXTILES BUSINESS. IT PAYS A RENT OF Rs.1000 MONTHLY , WAGES OF Rs.2000, ELECTRICITY EXPENSES OF Rs. 300. THUS ITS EXPLICIT COST IS 1000+2000+300 = 3300

Long run refers to a time period during which full adjustment to a change in environment can be made by the firm by varying all inputs, including capital equipment and factory building. Cost incurred during this period is long run cost. It includes all the expenses incurred while bringing about a change in all the mentioned inputs.

ENVELOPE OF AN INFINITE NUMBER OF SHORT-RUN AVERAGE COST CURVE. U SHAPED PLANNING CURVE

REFERS TO THE VALUE OF THE NEXT BEST ALTERNATIVE FORGONE IN MONETARY TERMS. IT ALSO REFERS TO IGNORING THE NEXT BEST ALTERNATIVE.

A PERSON INTO GARMENT BUSINESS DECIDES TO EXPORT GARMENTS AT Rs. 200 PER PIECE RATHER THAN SELLING IT DOMESTICALLY AT Rs. 300. THUS Rs.300 IS HIS OPPURTUNITY COST WHICH HE HAS FORGONE FOR THE SAKE OF EXPORTING HIS PRODUCT.

HIDDEN COSTS ACCOUNTING COSTS