Marginal benefit and cost are key economic principles used by firms and consumers to maximize utility. For producers, marginal benefit is the market price of the good, while for consumers, it is the utility gained from consuming the last unit. Both groups aim to produce or consume until marginal benefit and cost are equal. An […]
Freight charges are costs for transporting goods, including packaging and insurance. A combination of transportation methods is used, and sellers may waive charges to attract customers. Ground transportation is cheapest, and packaging and insurance are usually included in standard freight. Freight charges are the costs involved in transporting goods from one geographic location to another. […]
Cost objects are inputs that increase the cost of producing a good or service. Manufacturing companies use tangible cost objects like raw materials and labor, while service companies use activities like customer service or retail services. Companies can track these costs by establishing cost or revenue centers. A cost object is an item that represents […]
Bottled water in the US costs 240-10,000 times more than tap water. Some bottled water is just bottled tap water and can be contaminated. Tap water regulations are stricter and it may contain essential minerals. Most plastic bottles are not recycled, causing environmental concerns. According to a 1999 study by the Natural Resources Defense Council […]
The cost of capital is the expected rate of return compared to the amount obtained by selling the investment. Investors aim for a positive cost of capital and avoid securities with negative opportunity costs. Researching investment opportunities increases the chances of earning a rate of return. The cost of capital is essentially another way of […]
A cost allocation basis is a method of allocating costs to specific cost objects, such as projects or departments, in accordance with accounting principles. It can take various forms, and helps identify areas for improvement in operational processes. It can be used by businesses of any size and adapted to different environments. A cost allocation […]
Landed cost is the total cost of a commercial purchase, including shipping, duties, insurance, and other fees. Companies should try to limit these costs to improve profit margins. International purchases have additional costs that can add up quickly, so it’s important to understand all components of landed cost. Landed cost is the total cost of […]
Prince Charles and Diana’s 1981 wedding cost $70 million in 2010 currency, with security being the most significant expense. Diana’s dress cost $13,000 and had a 25-foot train. The wedding was watched by nearly a billion viewers. The couple divorced in 1996. The wedding of Prince Charles and Diana on July 29, 1981 at St. […]
The total cost function helps companies assess profitability by adding fixed and variable costs. Long-run total cost divided by units produced results in long-run average cost, essential for mapping costs and economic returns. Graphs show constant, increasing, and decreasing returns. The total cost function is an economic measure that helps a company assess its profitability. […]
Activity-based costing allocates manufacturing costs based on production activities using cost pools for overhead, indirect materials, and indirect labor. Each item is necessary but cannot be traced to an individual product, so a cost pool and cost driver assign costs to all goods produced. Activity-based costing is a cost accounting system that allocates manufacturing costs […]
“Factory cost” refers to the total cost of producing a product at the point of production, including labor, materials, and overhead costs. Raw material costs and labor are significant contributors, while overhead costs include expenses that don’t directly contribute to production. Factory costs can change over time due to various factors, including inflation and resource […]
Distribution cost analysis is a review of costs associated with moving goods from production to outlets. Methods include cost-benefit analysis, activity-based, or resource consumption style of cost accounting. Management accountants have the responsibility of reviewing these costs and finding the best method to reduce costs and become more efficient. Distribution cost analysis is a part […]
Direct material cost is the amount of money spent on raw materials to make a product. Raw materials must be identifiable and consistently used to be part of this cost. It is used to determine product cost, establish selling price, and assess profitability. Direct material cost is the amount of money a company has to […]
Capacity costs are fixed costs associated with running a business, such as rent or IT services. While they can be reduced, they cannot be eliminated without negative consequences. Utilities may or may not be considered capacity costs. Capacity cost is a type of fixed cost that is associated with the continued operation of a business. […]
Businesses use a simple process to determine the cost of goods sold (COGS) by comparing the amount of inventory available at the beginning and end of a period. This allows for the first-in, first-out (FIFO) method to evaluate business activity and make decisions about production and inventory levels. Many businesses use a simple process to […]
Marginal cost is the cost of the last unit produced or consumed, taking into account the increase or decrease in production or consumption costs. It is important for producers and consumers, and can follow a curved line on a graph. Specialization and economies of scale can reduce costs, and stores often offer deals to encourage […]
Distribution costs are the expenses incurred in moving a product from the manufacturing site to the point of consumption, including shipping and advertising costs. They are usually built into the price of the item and listed separately on a budget or profit/loss statement. Distribution costs refer to the costs associated with moving a product from […]
Acquisition costs include all expenses incurred when purchasing an asset, such as shipping and closing costs. This applies to real estate, advertising, and ongoing subscriber services, and should include all aspects of service delivery. Other factors, such as insurance and raw materials, should also be considered. Acquisition costs refer to the overhead costs of purchasing […]
The capital structure and cost of capital have a direct relationship, affecting a company’s financial well-being and investment decisions. Capital structure refers to debt and equity, while cost of capital is the expected returns from a project. Failing to balance them can negatively impact a business’s stability and viability. The capital structure and the cost […]
Gross capitalized cost is the amount financed in a vehicle lease before capital cost reductions, including vehicle cost, taxes, fees, and rent. It determines monthly payments, and is similar to the financed amount of a loan. Leasing is a type of loan, and the gross capitalized cost includes all lease costs. Lessees can negotiate the […]
