Tuesday, May 19, 2009


FIXED COSTS  -  Costs that are not influenced by the volume of production
VARIABLE COSTS  -  Costs that are influenced by the volume of production
ECONOMIC COSTS  -  Costs that may be influenced by, and therefore are relevant to, a decision by the firm
ACCOUNTING COSTS  -  Costs that are reported on financial statements or tax returns

SUNK COSTS  -  These are amounts that have already been committed and will be unaffected by a decision.  They are often included in accounting costs, but never included as economic costs.
OPPORTUNITY COSTS  -  These are the amounts that productive resources could earn for the owners if used in the best alternative way.  They are included as economic costs if those resources could be redeployed; they may not be treated as accounting costs or may be valued differently.

The breakeven point is the production level that earns just enough revenue to offset costs.

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