Transcription of Chapter 3: Cost Analysis and Estimation
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Chapter 3: Cost Analysis and Estimation
C14/1: Basics of Managerial Economics Cost Analysis and Estimation Pathways to Higher Education 17 Chapter 3: Cost Analysis and Estimation Cost Analysis Historical vs. current Costs Explicit vs. Implicit Cost Incremental vs. Sunk Costs Cost Analysis Cost Analysis and Estimation is made difficult by the effects of unforeseen inflation, unpredictable changes in technology, and the dynamic nature of input and output markets. Wide divergences between economic cost and accounting valuations are common. This makes it extremely important to adjusted accounting data to generate an appropriate basis for managerial decisions.
age. Therefore, current cost for such items is determined by what is referred to as a replacement cost which is defined as the cost of duplicating these items by using the current technology. b- Explicit vs. Implicit Cost: Explicit Costs are defined as the out of pocket money, such as paid wages, utility expenses, payment for raw materials and ...
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