COST ANALYSIS
COST ANALYSIS
OBJECTIVES
INTRODUCTION
MEANING
DEFINITIONS
TYPES OF COSTS
MONETARY COSTS
REAL COSTS
OPPORTUNITY COSTS
ECONOMIC COSTS
ACCOUNTING COSTS
INCREMENTAL COSTS
SUNK COSTS
FUTURE COSTS
PRIVATE, EXTERNAL AND SOCIAL COSTS
FIXED / SUPPLEMENTARY / OVERHEAD COSTS
VARIABLE / PRIME COSTS
REPLACEMENT COSTS
PRODUCTION COSTS
SELLING COSTS
CONTROLLABLE COSTS
DIRECT COSTS
INDIRECT COSTS
SHORT RUN COSTS CURVES
LONG RUN COSTS CURVES
OBJECTIVES
To understand the meaning of cost.
To discuss different types of costs.
To describe in detail the short run and long run costs.
To understand the importance of cost in managerial decision-making.
INTRODUCTION
To decide about the quality and quantity of a product depends upon the cost of the cost of the product. In producing a product / service a firm has in incur various costs in form of wages, interest and price of raw – material etc. Hence, from a firm point of view, to estimate correct cost is important for decision-making. An incorrect estimation or a misunderstanding of the costs may have a negative effect on the profit and growth of an organization.
MEANING OF COST
In simple words the payments rent, wage, interest and profit which are made to factors of production (land, labour, capital and entrepreneur) for their services. It means cost includes the value of the factors of production employed. The term costs mean sacrifice (interms of money or comforts) which are made to produce goods and services.
Cost function depends on various factors such as output, technology and price of input, productivity of inputs.
C = f (Q, T, PI, ProI, S)
C = Cost, O = Output, PI = Price of Input, S = Size of Plant, T = Technology, ProI = Productivity of Input
The most important determinant of cost is output. Generally cost of production increases with the increase in Output. Technology also has effect on the cost of production. If technology is modern, then cost of production will low and vice-versa. Due to rise in the price of input, the
OBJECTIVES
INTRODUCTION
MEANING
DEFINITIONS
TYPES OF COSTS
MONETARY COSTS
REAL COSTS
OPPORTUNITY COSTS
ECONOMIC COSTS
ACCOUNTING COSTS
INCREMENTAL COSTS
SUNK COSTS
FUTURE COSTS
PRIVATE, EXTERNAL AND SOCIAL COSTS
FIXED / SUPPLEMENTARY / OVERHEAD COSTS
VARIABLE / PRIME COSTS
REPLACEMENT COSTS
PRODUCTION COSTS
SELLING COSTS
CONTROLLABLE COSTS
DIRECT COSTS
INDIRECT COSTS
SHORT RUN COSTS CURVES
LONG RUN COSTS CURVES
OBJECTIVES
To understand the meaning of cost.
To discuss different types of costs.
To describe in detail the short run and long run costs.
To understand the importance of cost in managerial decision-making.
INTRODUCTION
To decide about the quality and quantity of a product depends upon the cost of the cost of the product. In producing a product / service a firm has in incur various costs in form of wages, interest and price of raw – material etc. Hence, from a firm point of view, to estimate correct cost is important for decision-making. An incorrect estimation or a misunderstanding of the costs may have a negative effect on the profit and growth of an organization.
MEANING OF COST
In simple words the payments rent, wage, interest and profit which are made to factors of production (land, labour, capital and entrepreneur) for their services. It means cost includes the value of the factors of production employed. The term costs mean sacrifice (interms of money or comforts) which are made to produce goods and services.
Cost function depends on various factors such as output, technology and price of input, productivity of inputs.
C = f (Q, T, PI, ProI, S)
C = Cost, O = Output, PI = Price of Input, S = Size of Plant, T = Technology, ProI = Productivity of Input
The most important determinant of cost is output. Generally cost of production increases with the increase in Output. Technology also has effect on the cost of production. If technology is modern, then cost of production will low and vice-versa. Due to rise in the price of input, the