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  • Cost Concepts

    Diunggah oleh

    kkavipriya
    21 tayangan24 halaman
    The document discusses different types of costs including fixed costs, variable costs, semi-variable costs, and marginal costs. It defines each type of cost and provides examples. Fixed costs remain constant regardless of production quantity, while variable costs change with output. Semi-variable costs can be either fixed or variable depending on production levels. Marginal cost is the change in total cost from producing one additional unit of output. The document also discusses average costs which are total costs divided by the quantity produced.

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    The document discusses different types of costs including fixed costs, variable costs, semi-variable costs, and marginal costs. It defines each type of cost and provides examples. Fixed costs remain constant regardless of production quantity, while variable costs change with output. Semi-variable costs can be either fixed or variable depending on production levels. Marginal cost is the change in total cost from producing one additional unit of output. The document also discusses average costs which are total costs divided by the quantity produced.

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    Attribution Non-Commercial (BY-NC)
    Unduh sebagai PPT, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    21 tayangan24 halaman

    Cost Concepts

    Diunggah oleh

    kkavipriya
    The document discusses different types of costs including fixed costs, variable costs, semi-variable costs, and marginal costs. It defines each type of cost and provides examples. Fixed costs remain constant regardless of production quantity, while variable costs change with output. Semi-variable costs can be either fixed or variable depending on production levels. Marginal cost is the change in total cost from producing one additional unit of output. The document also discusses average costs which are total costs divided by the quantity produced.

    Hak Cipta:

    Attribution Non-Commercial (BY-NC)
    Unduh sebagai PPT, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    dari 24

    COST CONCEPTS

    AND
    CLASSIFICATIONS

    FIXED COST AND VARIABLE


    COST

    FIXED COST AND VARIABLE COST ARE NOT TWO DISTINCT CATEGORIES RATHER THEY ARE THE TWO ENDS OF A CONTINUUM.

    FIXED COST

    THE COST INCURRED FOR THE INPUTS WHICH CAN BE USED OVER A PERIOD OF TIME PRODUCING MORE THAN ONE BATCH OF GOODS. THE COST INCURRED IN THE FIXED CAPITAL OF THE FIRM eg. EQUIPMENT, MACHINERY, LAND,BUILDINGS, PERMANENT STAFF ARE CALLED AS FIXED COST. FC INCLUDES RENT ON BUILDINGS, INTEREST ON CAPITAL, SALARIES TO THE PERMANENT STAFF, INSURANCE PREMIA, AND CERTAIN TAXES. THESE FIXED COST HAVE TO BE INCURRED EVEN IF THE PLANT IS AT STANDSTILL.

    FIXED COST

    FIXED COST- CONSTANT COST , SUPPLEMENTARY COST OR OVERHEAD EXPENSES. FIXED COST WILL NOT VARY WITH THE CHANGES IN OUTPUT i.e. WHATEVER BE THE QUANTITY OF PRODUCTION THESE COST REMAIN FIXED.

    FIXED COST

    VARIABLE COST
    THE COST INCURRED FOR THE INPUT WHICH ARE EXHAUSTED BYA SINGLE USE. EXAMPLE RAW MATERIALS,FUEL, PAYMENTS FOR LABOUR ETC. VARIABLE COSTS INCREASE IF THE OUTPUT IS INCREASED.IF THERE IS NO OUTPUT VARIABLE COST IS NILL. VARIABLE COST PRICE COST OR DIRECT COST.

    FIXED COST

    AVERAGE FIXED COST


    THE PER UNIT FIXED COST IS KNOWN AS AVERAGE FIXED COST. AFC = TFC/Q. WHERE , AFC = AVERAGE FIXED COST. TFC =TOTAL FIXED COST Q =NUMBER OF UNITS OF OUTPUT PRODUCED.

    AVERAGE FIXED COST

    AVERAGE VARIABLE COST

    AVERAGE VARIABLE COST REFERS TO THE VARIABLE COST DIVIDED BY THE NO. OF UNITS OF OUTPUT PRODUCED. AVC=TVC/Q WHERE , AVC = AVERAGE VARIABLE COST TFC =TOTAL FIXED COST Q=NUMBER OF UNITS OF OUTPUT PRODUCED.

    AVERAGE VARIABLE COST

    SEMI VARIABLE COST


    SEMI VARIABLE COST ARE NEITHER PERFECTLY VARIABLE , NOR ABSOLUTELY FIXED IN RELATION TO THE CHANGES IN THE SIZE OF THE OUTPUT.

    Semi- Variable cost

    STAIR STEP VARIABLE COST

    THERE ARE SOME COST WHICH MAY INCREASE IN A STAIR STEP FASHION. THEY REMAIN FIXED OVER A CERTAIN RANGE OF OUTPUT; BUT SUDDENLY JUMP TO A NEW HIGHER LEVEL WHEN OUTPUT GOES BEYOND A GIVEN LIMIT.

    A STAIR-STEP VARIABLE COST

    TOTAL COST
    TOTAL COST OF PRODUCTION IS THE TOTAL MONEY EXPENSES INCURRED FOR BUYING THE INPUT REQUIRED FOR PRODUCING A COMMODITY OR A SERVICE. IN ECONOMIC TERM,TOTAL COST INCLUDES THE REMUNERATION FOR THE ORGANIZER. THE REMUNERATION MAY BE CALLED PROFIT.

    AVERAGE COST
    AVERAGE COST IS THE UNIT COST PRODUCTION. IT IS THE COST PER UNIT OF OUTPUT. AVERAGE TOTAL COST = TOTAL COST/QUANTITY OF OUTPUT.

    AVERAGE TOTAL COST

    MARGINAL COST

    THE ADDITION MADE TO THE TOTAL COST BY THE PRODUCTION OF ONE ADDITIONAL UNIT OF OUTPUT. MCn = TC TCn-1.

    COMPUTATION OF MARGINAL COST


    OUTPUT IN UNITS TOTAL COST IN RS. MARGINAL COST IN RS.

    0
    1 2 3 4 5 6 7

    200
    250 290 320 360 412 472 546

    50 40 30 40 52 60 74

    MARGINAL COST

    RELATIONSHIP OF MC TO AC

    THANK YOU
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