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The oldest cost (i.e., the first in) is then matched against revenue and assigned to cost of goods sold. Last-In First-Out (LIFO) is the reverse of FIFO. Some systems permit determining the costs of goods at the time acquired or made, but assigning costs to goods sold under the assumption that the goods made or acquired last are sold first.
More generalized in the field of economics, cost is a metric that is totaling up as a result of a process or as a differential for the result of a decision. [1] Hence cost is the metric used in the standard modeling paradigm applied to economic processes. Costs (pl.) are often further described based on their timing or their applicability.
In neoclassical economic theory, the purchasing power parity theory assumes that the exchange rate between two currencies actually observed in the different international markets is the one that is used in the purchasing power parity comparisons, so that the same amount of goods could actually be purchased in either currency with the same ...
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
Total Cost = purchase cost or production cost + ordering cost + holding cost Where: Purchase cost: This is the variable cost of goods: purchase unit price × annual demand quantity. This is . Ordering cost: This is the cost of placing orders: each order has a fixed cost , and we need to order / times per year. This is /
Economics focuses on the study of economic goods, i.e. goods that are scarce; in other words, producing the good requires expending effort or resources. Economic goods contrast with free goods such as air, for which there is an unlimited supply.
The equilibrium condition is that MR=MC, i.e. the marginal equality of benefits and costs. Since the goods produced are made up of factors, output is seen as a function of factor in factor markets. [4] The Circular Flow Diagram. In perfectly competitive markets firms can "purchase" as many inputs as they need at the market rate. Because labor ...
An important part of standard cost accounting is a variance analysis, which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate action to ...