Marginal opportunity cost combines opportunity cost and marginal cost to measure the cost of producing extra units of goods. It can be applied to business decisions, such as increasing production, or personal decisions, such as buying multiple ice cream cones. Marginal opportunity cost is an expression used to describe the amalgamation of two economic terms: […]
To determine the cost basis of a company’s spinoff, use a formula involving the spinoff and parent company’s stock figures, market price, and distribution ratio. Contact the parent company for the distribution rate. The derived cost basis is essential for investment and selling derivative shares. When a company takes part of its business and breaks […]
Calculating franchise costs is complex and varies depending on factors such as industry, franchise, location, size, and additional costs like royalties, licenses, and professional services. Inventory, equipment, and operational costs must also be considered. Calculating the cost of a franchise can be very complex. It is therefore nearly impossible to give an average franchise cost […]
The marginal cost of resources is the cost of purchasing one unit of resources used to produce a good. Companies must balance this cost with revenue to make a profit, and management must be aware of it. In less competitive markets, the MRC slope will rapidly increase up or down depending on demand. The marginal […]
Cost and management accounting is a system used by managers for internal financial purposes, focusing on efficient resource use. Cost accounting captures data on operating expenses, while management accounting uses it for decision-making and strategic planning. Data collection includes labor and equipment tracking, and reports help managers align costs with production results to minimize waste. […]
Constant opportunity cost is when the cost of pursuing an opportunity remains the same even as benefits change. It can be used in manufacturing or other economic situations, and can help businesses determine if an opportunity is worth pursuing. Constant opportunity cost is a situation in which the costs of pursuing a given opportunity do […]
Expense centers, also known as cost centers, are departments or services within organizations that do not generate direct income and are seen as a financial burden. Examples include IT and customer service centers. They are often the first to be scaled back or closed during financial crises. Expense center or cost center is a term […]
Cost accounting evaluates overhead costs for businesses, helping managers determine spending and identify trends in production costs. It is also useful in product development and marketing strategies, providing data for business decisions. Cost accounting is an approach to evaluating the overhead costs associated with doing business. Often based on standard accounting practices, it is one […]
A cost-plus contract allows a contractor to be paid for all expenses up to a set limit, with the possibility of additional compensation. There are four variations, including a fixed fee, incentive rate, award fee, and percentage of cost agreement. This type of contract is more common in business and government agencies, but may be […]
Independent cost estimates are used to obtain an objective view of the cost of a proposed project and for transparency. An individual may also obtain an independent cost estimate as a prudential measure in carrying out a project. Companies with many shareholders may need to do an independent cost estimate to make the whole process […]
Discretionary spending refers to costs that can be cut to save a company money, and can also apply to personal household budgets. Companies may start by cutting benefits or unnecessary costs, but should not disrupt business operations. Advertising is often one of the first expenses to be cut. Discretionary spending is another term for discretionary […]
Out-of-pocket costs refer to direct expenses incurred in a project, while opportunity costs are indirect financial losses. They can include initial expenses, ongoing payments, and maintenance costs. Opportunity costs are expenses that cannot be classified as out-of-pocket costs. An out-of-pocket cost is the sum of money that an individual or entity spends on a particular […]
Parking structures can cost over $100 million USD and range from $15,000 to $140,000 USD per space. Large structures include West Edmonton Mall, Seattle-Tacoma Airport, and Metro Detroit Airport. They can last 50 years without major overhauls. The cost of a parking structure can vary widely, depending on where it’s built, how big it is, […]
Pension expenses are costs incurred by employers administering pension plans for employees, recorded in accounting reports and using appropriate methods. Expenses include service costs, projections, and amortized expenses. The pension expense is recorded on the income statement, and the structure of the plan determines which transactions are considered expenses. Government regulations also play a role […]
The Second Avenue Subway Line in New York is the most expensive subway in the world, costing approximately $2 billion per mile. Factors affecting cost include location, property prices, labor costs, design and construction plans, and age of existing transit lines. A new subway line can cost anywhere from several million US dollars (USD) to […]
Occupancy cost, including rent, property taxes, insurance, and fees, can significantly impact a company’s financial condition. A cost of occupancy ratio can help calculate a reasonable amount to spend, and high ratios may indicate future cash flow problems. Internal financial reports and disclosures can address concerns and inform investors. Occupancy cost is the expense associated […]
The sunk cost fallacy is when prior investment is used as a reason to continue a course of action, even if it’s not rational. Sunk costs cannot be recovered and should not influence decisions. It can lead to commitment escalation and is sometimes a misinterpretation of decision-making processes. The sunk cost fallacy is a logical […]
Collection costs are expenses associated with recovering debt from a borrower who has defaulted, such as fees charged by collection agencies and attorneys. Borrowers are typically responsible for paying these costs, which can include postage, phone calls, and attorney fees. If a borrower misses two payments in a row, most creditors will declare the loan […]
The cost of hosting an inmate varies by country and type. In the US, it ranges from $13,000 to $50,000 per year for state inmates and $25,000 for federal prisoners. In Canada, it’s $144,000 to $240,000 for female inmates and $84,000 for males. In the UK, it’s about $62,000 per prisoner annually. The US has […]
Depreciation cost is the loss of value in an item over time, with four approved methods for calculation. It should be shown separately in financial statements and adjusted for the amount that could be obtained if sold. Straight-line, declining balance, and percentage of use are common methods. Depreciation cost is a term used to account […]
