Chapter 8-13 Reviewer For Finals
Chapter 8-13 Reviewer For Finals
The cost relevant in decision making are Costs in the long run
incremental cost only. Sunk cost does not depend Marginal and average cost
on the decision, they are irrelevant for decision
making. Total Revenue
The total value of the output produced
Explicit Cost
The business expense accounted cost that can be easily Marginal Revenue
identified such as wage, rent and materials. Is the revenue received from selling one more units of
Gives clear and evident cash flows output
Directly affects the revenue
Intangible assets are not explicit cost Optimum inventory level
Is the level of stocks in the pipe line: goods which have
Implicit Cost been produced but have not yet reached the final
Results if the person who at first foregoes the customers which can be held at minimum cost.
satisfaction in the search of an activity and is not
rewarded by money or another form of payment.
Example is goodwill
Real Cost
Straightforward
Doing the work by myself
Opportunity Cost
Calling a professional to do the work
Private Cost
Cost that has to be paid by an individual who is directly
involved in the production of consumption of a
particular good
Social Cost
Or external cost is the cost burden carried by individuals
who are not directly involved in the production
Determining Output
Profit
Total revenue and cost
Marginal revenue and cost
Total Curves
Total revenue
Total cost