Cost Concepts

Reference: Gillermo M. De Leon & Norma D. De Leon

Why cost is an
01
important concept?

02 Cost Vs. Expense

and Loss

03 Concepts of Costs
WHAT IS COST? WHAT IS LOSS?
-CASH OR CASH EQUIVALENT -IS A COST THAT EXPIRES
VALUE WITHOUT PRODUCING ANY
-INCURRED TO PRODUCE REVENUE BENEFIT.
FUTURE BENEFITS =
REVENUE

WHAT IS COST OBJECT?

WHAT IS
- ARE EXPIRED COSTS -IT IS ANYTHING FOR WHICH
EXPENSE? A COST IS TO BE
-DEDUCTED FROM CALCULATED OR MAKES
REVENUE IN THE INCOME YOU INCUR A COST.
STATEMENT
Concept Of Costs
OUTLAY COST DIRECT COST FIXED COST VARIABLE COST
-Any costs
incurred in -Are costs that can -Constant costs -Are business
purchasing an be calculated on a -Are not a function expenditures
object or per unit basis for of the output.
that change
implementing a product or service. -They do not vary
with the output up with business.
plan. -it can be easily
to a certain extent. -A function of
-Include the idetifiable,
-They require a the output in
actual traceable to a fixed expenditure of the production
expenditure of particular product, funds regardless of
funds on factors operation or plant. period.
the output.
like material, rent,
wages, etc.