What and how to attribute to costs
Total costs are the sum of the company's cash spent on production. To calculate them, add up the firm's fixed and variable costs. To calculate the average costs for a certain period, divide total costs by the quantity of goods released.
Imputed or economic costs are an indicator of the economic costs incurred by the enterprise. These expenses include resources acquired by the organization, its internal resources, as well as profits. There are also accounting costs that imply the costs incurred by the company for the purchase of certain factors of production. Accounting costs can not exceed economic, because they take into account only real costs aimed at acquiring the necessary resources from external suppliers, which is a legally registered fact and is the basis for specifying in accounting.
Accounting costs are divided into direct and indirect. Direct includes expenses spent only on production. By indirect costs include all costs that are necessary for the enterprise for its normal operation: overhead costs, depreciation, interest payments to banks, etc.
Another group are opportunity costs, which are funds aimed at the production of additional goods and the provision of special services that are not the main focus of the enterprise. The opportunity cost is to attribute all third-party costs or future costs based on financial analysis and production plan. To determine opportunity costs, you need to deduct from the economic costs of accounting costs.
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