Economics Assignment Help with Costs
What do you mean by costs or estimated costs?
Cost concept is used for the deduction and analyzing the price and cost for a project which runs in a shot run or the long run. Cost is actually the value of the money which is extensively used in the production process. Costs the term which is used in across many fields similarly. It is used in the retailing, accounting, research and production. The business firms also use this term to when a certain amount of money is used to cover the expenses for the production. In this type of scenarios, the money acts as the input which is spent to acquire an asset or clear off a liability. The price of the product is the additional profit margin incurred upon the cost.
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What are the different types of accounting costs?
There are different types of costs which signifies different types of money, these are:
1. Opportunity costs
Opportunity costs is the main value which have the best alternative choice but was not chosen with the order of the content which was to be pursued and bought. The opportunities are usually forgone. Cost which is not calculated and qualified is called opportunity cost.
2. Historical costs
Historical costs are as the name suggests is the historical cost of an economic item. It is basically the first cost of an item and the original nominal monetary value. The main cornerstone on which the historical cot is based upon is the stable measuring unit assumption. In most of the times, the liabilities and assets are shown with their base nominal monetary value because sometimes there is no or minimal change in the costs of the assets and liabilities. The balance sheet value of the historical cost may differ from the real value one.
3. Marginal costs
Marginal cost is basically the change in the total cost which have risen with the quantity produced and is incremented by one unit. That one unit is actually the cost of producing one or more units of commodities. In simpler words, the marginal cost is stated at each and every level of the production process which also include the additional costs required to produce the next unit of the commodity.
4. Sunk cost
Sunk cost is the cost which refers to the cost which is already incurred and have no chance of being recovered. This term is used widely in the economics and business terminology. Sunk costs are also known as the retrospective costs and are fixable as well as variable.
5. Transaction cost
Transaction cost is basically the cost which is already incurred by the business firm when making an economic exchange of goods or any services. In simpler words, the transaction cost is the cost of participating in the market procedures and contests. Search and information costs, Bargaining costs and Policing enforcement costs are all parts of the transaction costs. In some markets the bidding and buying services are also enforced.
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What are the different nature of costs?
The cost of any commodity or service is distinguished on the basis of its nature, these are
1. External costs
These are the costs which the external parties other than the own buyer has to pay when the transaction is done by the buyer. The external parties who bear such expenses are either some particular individuals or a large society. Sometimes, the external costs are not monetary and are non-monetary which leads to quantification of the costs.
2. Social costs
Social costs are basically the total sum of the external costs as well as the private costs. These are more of the private costs plus the external costs. A theory suggests that the buyers only consider the cost which they have to bear by themselves but don’t even think about the ones that are borne by the others.
3. Private costs
These are the exclusive costs which the buyer of any good or service pays the seller. These costs are permanent incurred and doesn’t include any third parties. A certain price, which is set by the seller is paid by the buyers for the purchasing of desired goods or services.
What are the different types of costs?
There are different types of costs which help us to differentiate between the costs, these are:
1. Fixed costs or Total Fixed costs
Fixed costs are the costs which does not change with the level of production undertaken by the business firm. Fixed costs are independent of the output generated. Some examples of fixed costs are: Depreciation, Interest rates and Taxes. Total fixed costs are the costs which are associated with the fixed input in a production process. On the other hand, average fixed cost refers to the per unit cost of an output in production.
2. Variable costs or Total variable costs
Variable costs are basically the costs, which are rest of the total cost of the production process. This part is that varies with the production as you produce more goods or less. Output is the element on which the variable costs solely depends. Total Variable cost are the costs which are associated with the variable inputs in a production. On the other hand, the average variable cost is the cost per unit of an output.
3. Total costs
Total costs are the sum of all the costs which is incurred in a production process, this includes the total fixed costs and the total variable costs. Average total cost on the other hand mentions the sum of average fixed cost and average variable cost.
4. Marginal cost
Marginal cost is the cost which is incurred when an additional cost is incurred when producing an additional unit of output in a production. Marginal cost is basically, total cost divided by the output.
Some of the main pointers which should be kept in mind while studying costs are:
- The AFC is always falling at a constant decreasing rate.
- AVC and AFC falls at the beginning but then reaches a minimum point, after that rises up at the higher levels of output.
- MC or marginal cost is generally increasing.
- MC crosses the AVC as well as the ATC on the minimum point
- AFC equals the difference between the AVC and ATC.
- When the MC is above the average value of the output then the average value of the output also increases.
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