Concepts Of Cost
- 2. Types of cost Implicit cost Money cost Opportunity cost Economic cost Real cost Social cost Private cost Original cost Replacement cost
- 3. Money Cost & Implicit Cost Money cost-: It refers to the money expenditure incurred by a firm on wages &salaries paid to the hired labour the payment for materials, power, light, transportation etc. Implicit cost-: Implicit costs are costs of self owned and self employed resources. For example:- Wages or salary for entrepreneur’s own labour.
- 4. Economic Costs & Opportunity Costs Economic costs -: E conomic costs relate to future. Than are in the nature of the incremental costs. That are used for economic future. Economic cost=explicit costs - imputed value of self owned factors of production Opportunity cost-: The opportunity cost of anything is the alternative that could be produced instead by the same factors or by an equivalent group of factors, costing the same amount of money .
- 5. Real Costs & Private & Social Costs Real costs : The exertion of all the different kinds of labour that are directly or indirectly involved in making it, rather the waiting required for saving and capital used in making it. Private costs : Private costs refer to the costs to an individual firm in producing a commodity. Social costs : Social costs, on the other hand, are the costs of producing a commodity to the society as a whole. For example – the social costs of driving motor cars includes roads maintenance.
- 6. Original & Replacement Cost Original cost-: Original costs refer to the original price paid for the asset acquired. These are also known as ‘historical cost’. Replacement cost -: Replacement cost is the price that would have to be paid currently to replace the same asset. It is a relevant concept when financial statements have to be adjusted for inflation.
- 7. Fixed &Variable Costs Fixed costs Fixed costs are those costs which do not vary with the level of output. For example – rent of land and factory building.
- 8. Variable cost Variable costs-: Variable costs refer to those costs which vary directly with the level of output. These are also called direct cost. For example – wages to temporary staff.
- 9. Average & Marginal Costs Average costs -: Average costs is the cost per unit of output assuming that production of each unit of output incurs the same cost. Ac=tc/ number of units. Marginal costs -: Marginal costs are the incremental or additional costs incurred when there are addition to the existing output of goods and services. Mc= ∆TC/ ∆QT
- 10. Thank you By: AKHILESH CHAWDA PGPSM