Explain the following types of costs, Cost Accounting

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Explain the following types of costs.

a. Fixed and variable costs
b. Explicit and implicit costs
c. Direct and indirect costs
d. Past and future costs
e. Out of pocket and book costs.

a. Fixed cost: the cost which remain fixed for a certain period of time irrespective of the amount of production. Variable costs: the cost varies with the output.

b. Explicit costs: the cost which the firm has already spent or going to spend. Implicit cost: the cost of the opportunity foregone.

c. Direct costs: the costs which can be directly attributed to the cost of the unit. Indirect costs: the cost cannot be directly attributed to the product.

d. Past cost: it is also called historical cost which is already incurred. Future costs: the cost which the firm is going to incur in the future.

e. Out of pocket costs: involves current payment to outsiders .eg. payment for raw materials. Book costs: book costs do not require current payments. Eg. Depreciation.


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