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A deep knowledge of several cost concepts is required for any business to take decisions. There are nine cost concepts used in decision making, they are- Marginal cost, Out of pocket costs, Differential Costs, Sunk Costs, Imputed Costs, Opportunity Cost, Avoidable cost and Unavoidable Cost, Relevant Cost and Irrelevant Cost, Replacement cost. These different types of costs have their own characteristics. Cost Concept for Decision Making Assignment Help provides better approach in decision making using cost concepts.
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Cost Concept for Decision Making
The various cost concepts used in decision making explained in Cost Concept for Decision Making Assignment Help are-
- Marginal Cost
A marginal cost is one type of cost concept used in decision making. The sum of the variable costs is called as marginal costs. It includes the submission of prime cost and variable overheads. In order to determine the cost of products and finished products, variable costs are taken and fixed costs are ignored.
- Out of Pocket Costs
Out of Pocket costs is one type of cost concept used in decision making. These are those expenses that require payment during a project. This cost can be applicable to the management decision-making process. Purchase of new equipment or product is an example of Out of pocket cost. Out of pocket costs can be studied thoroughly in Cost Concept for Decision Making Assignment Help.
- Sunk costs
A Sunk cost is one type of cost concept used in decision making. The expenditures which are irrecoverable can be treated as sunk costs. Or in simpler terms, money is spent and is permanently lost. It is also known as prior year cost, embedded cost, sunk capital and stranded cost. This cost remains unaffected by increase or decrease of volume. One examples of sunk cost is depreciated fixed assets.
- Differential Costs
A Differential cost is one type of cost concept used in decision making. The difference between the decisions of two alternative decisions is known as differential cost. This type of cost is used when there are multiple options and we have to choose only one and drop the other choices. If the decision increases the cost then it is called incremental cost. If the decision decreases the cost then it is called decremental cost. It is explained in Cost Concept for Decision Making Assignment Help.
- Avoidable Cost and Unavoidable Cost
Avoidable Cost and Unavoidable cost is one type of cost concept used in decision making. Avoidable cost is that cost which can be eliminated if the product or department is not in use. Unavoidable cost is the cost which cannot be
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