Variable cost :- Varies with the volume of production.
Overhead cost :- It is fixed, irrespective of the production volume.
Direct material cost :- The cost of material that are used to produce product.
Direct labor cost :- The salary or wage which paid to labor.
Direct expenses :- Expenses that are in relation to the production volume, other than direct material cost and direct labor cost.
Prime cost = direct material cost + direct labor cost + direct expenses
Factory cost = prime cost + factory overhead
Production cost = Factory cost + office and administrative cost
Goods sold cost = production cost + opening finished stock – closing finished stock
Sales cost = goods sold + selling and distribution overhead
Sales = sales cost +profit
Selling price per unit = sales/quantity sold
Other costs and revenues
Marginal cost
Marginal revenue
Average cost
Sunk cost
Opportunity cost
Recurring cost
Nonrecurring cost
Incremental cost
Cash cost
Book cost
Life cycle cost
Marginal cost :
It states that, marginal cost of the product is the cost of producing an additional unit of that product.
For instance, 10 units of product is Rs.5000. cost of producing 11 units is Rs.5100. then the marginal cost of the 11th unit is Rs.100.
Marginal revenue :
It states that, marginal revenue of a product is the additional revenue of selling an additional unit of that product.
For instance, selling revenue of 10 units be Rs.5000. selling revenue of 11th unit be Rs.5100. the marginal revenue is Rs.100.
Average cost :
It is the ratio of, the total cost of producing a given volume of a product to the volume of production.
Mathematically,
Average cost =
Sunk cost :
Sunk cost is the past cost of an equipment or asset.
For instance, equipment was purchased on 1 year back for rs.5000. The present value of that equipment is not rs.5000. So the purchase value of the equipment is known as sunk cost.
Opportunity cost :
The amount that is foregone by not investing in the other alternative is called as opportunity cost. The opportunity cost of an alternative is the return that will be foregone by not investing the money in another alternative.
Recurring cost :
Recurring costs are incurred for goods and services used in a business during a financial year.
Monthly wages for employees.
Rent and electricity bill.
Maintenance cost of the buildings and equipment's.
Non-recurring cost :
Costs are incurred one time in a business is known as non-recurring cost.
Initial outlay of company.
Expansion of business at point in a time.
Cost for plant modernization.
Incremental cost :
It states that, the cost of increasing the production volume by one unit. It includes all variable costs. This cost is very useful for economic analysis and determination of production volume of a product.
Cash cost :
Cash costs are paid by the business while using cash or cheque not credit. The cost paid by credit will not recorded in general ledger.
Book cost :
Book cost are, the total money spent for purchase an equipment and other facilities for any business is called book cost.
Life cycle cost :
There will be economic costs such as raw material cost, procurement of components and sub-assemblies, maintenance and waste management. The sum of these economic cost is called life-cycle cost.
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