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In contracting, actual costs to date amount includes direct labor, direct material, and other direct charges.Amount paid for an asset; not its market value, insurable value, or retail value. It generally includes freight-in and installation costs, but not interest on the debt to acquire it.Expenditure required to buy or produce an item. The actual cost of a purchased item includes the list price (net of discounts) plus delivery and storage. The actual cost to manufacture a product is the total of direct material, direct labor, and factory overhead. Opportunity cost The cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for. Opportunity cost analysis is an important part of a company's decision-making processes, but is not treated as an actual cost in any financial statement. Absolute cost the minimum costs that an organisation must bear to remain in business. Imputed cost Cost that is implied but not reflected in the financial reports of the firm; also called implicit cost. Imputed costs consist of the Opportunity Costs of time and capital that the manager has invested in producing the given quantity of production and the opportunity costs of making a particular choice among the alternatives being considered.Expense not incurred directly, but actually borne. For example, a person who owns a home debt-free has an imputed rent expense equal to the amount of interest that could be earned on the proceeds from the sale of the home if the home were sold. Incremental cost The cost associated with one additional unit of production. also called marginal cost.The encompassing change that a company experiences within its balance sheet due to one additional unit of production.Incremental cost is the overall change that a company experiences by producing one additional unit of good. Sunk cost A cost that has been incurred and cannot be reversed. Also referred to as "stranded cost."A worn-out piece of equipment bought several years ago is a sunk cost because the cost of buying it cannot be reversed. Sunk costs are unrecoverable past expenditures. These should not normally be taken into account when determining whether to continue a project or abandon it, because they cannot be recovered either way. It is a common instinct to count them, however. Acquistion cost The cost of equipment or property after adjustments for incentives, discounts, or closing costs, but before any sales tax.Acquisition cost is the pretax amount of money it costs to gain title to any property. Acquisition cost usually applies to fixed assets. The acquisition cost accounting amount is always calculated at the amount after all discounts, closing costs, transfer costs, and other adjustments are made. Service cost Actuarial present value of benefits attributed by the pension formula to employee service performed during the current year; also called service cost. ...
Maintanence cost The ultimate measure of the reliability of equipment is the cost to maintain it. Space Occupancy cost Expense of occupying factory.Operating costs are expenses that relate to a buisness’ operations. etc. salaries. While. such as depreciation. Long term cost A long period of time cost. and which is often the second largest business cost after payroll. Whether or not to build a new factory would be considered a long run decision.For example. Future cost costs which may be incurred in the future whose total will be affected by any decision made now or in the future. Short term cost A period of time in which the quantity of some inputs cannot be increased beyond the fixed amount that is available. as opposed to production. office. Past costs are usually past or historical costs.g. For example. property tax.These are cost which are incurred for long duration of time i. The $20. charge occupancy costs against their earnings to have a realistic view of their expenses. while equipment is undergoing repairs. in practice. all costs vary over time and no cost is a purely fixed cost. suppose a machine acquired for $50. it is also reasonable to assign a cost to down time. and wages. rent. Maintenance cost typically includes the cost of labor and parts to perform repairs. or other space.000 book value is a sunk cost that does not affect a future decision involving its replacement. idle employees.Periodic cost that remains (more or less) unchanged irrespective of the output level or sales revenue of a firm.e these are costs which will incurred for sure in present as well as in future. other costs may be incurred such as lost production. such as sales and administration. called fixed costs and variable costs. also called operating expenses. Some firms which. as for a bond (e. For example. 10 or more years) or for a buy and hold investment strategy. such as rent. warehouse. . although owning the occupied property. In many cases.000. Operating costs usually fall into two categories. Operating cost The day-to-day expenses incurred in running a business. Past cost costs incurred in the past whose total will not be affected by any decision made now or in the future. or interest expense. A business may have more of one type of operating cost than the other.000 three years ago has a book value of $20. insurance. It can also refer to the costs of operating a specific device or branch of a corporation. the concept of fixed costs is necessary in short-term cost accounting. Fixed cost A cost that does not vary depending on production or sales levels.what quantity of inventory to order is a short run decision. insurance. interest.
Direct cost Expense that can be traced directly to (or identified with) a specific cost center or cost object such as a department. Total cost Total cost (TC) describes the total economic cost of production and is made up of variable costs. function. security. For example. material. operating cost.. . which are independent of the quantity of a good produced and include inputs (capital) that cannot be varied in the short term. This cost changes with the number of flights and how long the trips are. computing. the marginal cost is the cost of the next unit produced. or (3) which has both a fixed cost element (such as monthly rental for a phone line) and a variable cost element (call charges). Combined with fixed costs. supervision) incurred in joint usage and. Mathematically. they are grouped under variable costs. Total cost in economics includes the total opportunity cost of each factor of production in addition to fixed and variable costs. on cost. program). Also called mixed cost. Direct costs (such as for labor. such as buildings and machinery.g. it is the cost that can be saved by dropping a particular product line or department (e. As a general rule. the total fixed costs stays the same. therefore. Escapable cost cost that will not be incurred if an activity is suspended. Also called direct expense. (2) the total of which responds less than proportionately to changes in volume of activity. Indirect cost Expenses (such as for advertising. plus fixed costs. While the total variable cost changes with increased production. except (1) sunk cost and (2) costs that will continue regardless of the decision. material or overhead that changes according to the change in the volume of production units. it is the cost of producing one more unit of a good.A cost that changes in proportion to a change in a company's activity or business. opposite of direct cost. fuel or power) vary with the rate of output but are uniform for each unit of production. and are usually under the control and responsibility of the department manager. and are grouped under fixed costs. the marginal cost (MC) function is expressed as the first derivative of the total cost (TC) function with respect to quantity (Q). That is.The marginal cost of an additional unit of output is the cost of the additional inputs needed to produce that output. All costs are avoidable. Marginal cost marginal cost is the change in total cost that arises when the quantity produced changes by one unit.Variable cost A cost of labor. or variable expense. salaries paid to employees working in a particular product line or department). Indirect costs are usually constant for a wide range of output. Semi Variable cost Production cost (1) that remains fixed up to a certain volume. prime cost. Note that the marginal cost may change with volume. variable cost. difficult to assign to or identify with a specific cost object or cost center (department.Avoidable or escapable costs are those costs which can be avoided by stop doing or start doing any particular activity. variable costs make up the total cost of production.The cost not directly attributable to the manufacturing of a product. after which it becomes variable. and so at each level of production. or product. process.A good example of variable cost is the fuel for an airline. most costs are fixed in the short run and variable in the long run. The rate at which total cost changes as the amount produced changes is called marginal cost. which vary according to the quantity of a good produced and include inputs such as labor and raw materials. maintenance. also called escapable cost.