Assignment in AC56 : JELLY P.

VILLAFLOR AIS/IA1
JANUARY 19, 2023
1. Marginal cost- refers to the expense of creating one more item for sale. It is most
commonly used in manufacturing, where it's called the marginal cost of
production. The marginal cost tells a business precisely how much more they
have to spend to create one more product, or deliver a service one more time.
2. Out of pocket costs- in managerial accounting are expenses that could be
incurred or avoided depending on management's decisions. In other words, an
out-of-pocket cost is a potential future outlay of cash that management needs to
decide whether or not to make.
3. Sunk cost- A sunk cost refers to money that has already been spent and cannot
be recovered.
4. Imputed cost- Imputed costs are those incurred when using an asset as opposed
to investing it or the costs arising from following one particular action and
foregoing another.
5. Opportunity costs- Opportunity cost refers to what you have to give up to buy
what you want in terms of other goods or services.
6. Replacement costs- Replacement cost is a term referring to the amount of
money a business must currently spend to replace an essential asset like a real
estate property, an investment security, a lien, or another item, with one of the
same or higher value.
7. Avoidable costs- An avoidable cost is a cost that can be eliminated by not
engaging in or no longer performing an activity.
8. Unavoidable costs- An unavoidable cost is an expenditure for which there is a
firm spending commitment in the short term. Because of the commitment, it is not
possible to sidestep the cost until the commitment period has ended.
9. Relevant and irrelevant costs- Relevant costs are costs that will be affected by a
managerial decision. Irrelevant costs are those that will not change in the future
when you make one decision versus another.
10. Differential costs- Differential cost refers to the difference in costs between two or
more business decisions. Specifically, a differential cost arises when there are
multiple similar options and it's necessary to select one at the forfeiture of others.