Introduction
In this written assignment, I am going to explain the difference between implicit and explicit costs. Also, I will provide two examples of when an explicit cost is different from an implicit cost. In addition, I will explain the difference between accounting and economic profit and provide two examples of when they differ.Finally, I will explain the difference between economies and diseconomies of scale and provide examples of when an actual firm might benefit from economies of scale or be harmed by diseconomies of scale.
Explain the difference between implicit and explicit cost
Explicit cost is the revenue coming into to a business minus the costs.For example, a pizza parlor, the cost includes,workers to run the business, ovens to cook the pizza, and ingredients to make the pizza. Accountants usually look at the expenses for a business in this manner the revenue minus the explicit costs.
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An example, a student graduates from High School and starts to work at a local retail store and earns $1500 a month. The student has bills to pay, such as phone, car, and rent which is a total of $1000 a month. (Explicit cost). The student still has $500 to spare, not too bad of earning for a high school graduate. But, if you factor in the implicit cost, if the student graduated from college, he would be making double $3500 a month. In this case, the student is losing $2500, which he would have had if he graduated from college.
Give two examples of when an explicit cost is different from implicit
In this paper I am going to explain some of the key terms that companies need to keep in mind when operating their business. First, we will start with marginal revenue, which is defined simply as the extra revenue that is made for each additional unit of a product that is sold. This is directly related to marginal cost, which is what it costs the company to make that additional unit of product.
are costs that have already been incurred and cannot be changed by any decision made
* Implicit—This cost is implicit since it is not money out of the company’s pocket, but it is not applicable since the cost is not relevant.
In other words, the direct cost is a direct relationship with the production process, while the indirect costs are not a direct relationship with the production process, the cost of services in the production process. Within a period of total indirect costs are essentially constant, it is also known as fixed costs and indirect costs. Although its total output within a certain range does not substantially change with production, but allocated to indirect costs per unit of product decreases with the increase in production. For example, a company produced can food. Each food cans have direct costs, including the cost of ingredients, pots, you can label, wages involved in the production of canned food, canned and tag content of workers and machinery in the process of actual power consumption. There are also indirect costs including multi pack packaging; administrative costs, including salaries of administrative and management personnel, equipment, etc.; premises rented; total power utility costs and other buildings, as well as marketing and
unit, two types of costs are distinguished. Firstly the direct costs, consisting of the direct
On the other hand, direct costs represent labor, materials, equipment, and sometimes subcontractors. They are assigned directly to a work package and activity. When project durations are imposed, such as in the racing sailboat project, direct costs may no longer represent low-cost, efficient methods. As detailed in the crash cost list, costs for the imposed duration date will be higher than for a project duration developed from ideal normal times for
Explicit cost is defined as the business expanse which is recorded with the passage of time. When cash starts out flowing from any business, it can cause the profit generation
If is were going into business and were going to manufacture dealybobs, I would consider both explicit costs(including fixed costs and variable costs), and implicit costs.
2. (a) What is the distinction between marginal cost and incremental cost? (b) How are sunk costs treated in managerial decision making? Why?
In general, cost means the amount of expenditure (actual or notional) incurred on, or attributable to a given thing.
This will include all of a firm’s material cost, as well as any hourly waged employee(s). An example that can be provided below would be the configurations of the wages, manager wage, business hours, etc.
Indirect Costs are those you can’t clue to anniversary job, but you can clue to anniversary department, annual or artefact band you are producing. Computation of the Gross Allowance and Addition Allowance are two of a lot of important numbers you charge to actuate for planning, barometer and managing your business.
Two costs related to opportunity costs are explicit and implicit costs. Explicit costs is the direct monetary payment or expense that a producer incurs by choosing one option over another. For example, a firm incurs $1000 as wages for workers when it decides to produce steel pans instead of cast-iron pans and this $1000 is considered as the explicit opportunity cost for the production of steel pans. Implicit costs, on the other hand, are those that cannot be measured directly and do not involve any monetary payments. A good example is when someone chooses between working and staying at home for personal reasons. The implicit opportunity cost is the salary that is lost by not working and staying at home to pursue a passion.
Another major reason direct costs would not be accurate is that direct labor costs are not applied at all or to the right products. Employees that provide direct labor to a product need to assist in keeping accurate records of whether they worked on the manufacturing of a product and how much time they spent. This is typically done through coding time on time cards to indicate when they worked on a product and for how long. If this is not done accurately, the overall labor costs of an item would be in accurate and this would lead to the
Indirect cost: which cannot be accurately attributed to the regulation’s effect and linked with another cost object;