About This Chapter
Accounting & Economic Costs - Chapter Summary
This chapter is filled with engaging video and text lessons you can access from any computer, smartphone or tablet to enhance your knowledge of accounting and economic costs. Review these lessons whenever it's convenient to ensure you have full comprehension of period costs, cost-benefit analysis, profit maximization and much more. If you need additional information about these topics, feel free to submit your questions to our experts. Once you've completed this chapter, you will be able to:
- Differentiate between accounting and economic costs
- Identify the components and discuss the purpose of cost accounting
- Define transaction costs in economics and period and product costs in accounting
- Share the definitions of cost driver in accounting and sunk costs
- Explain the differences between standard cost and job order cost accounting systems
- Exhibit an understanding of cost-benefit analysis and opportunity cost
- Provide definitions for implicit and explicit costs
- Describe accounting profit and how to calculate economic profit
- Discuss the theory of profit maximization
1. Purpose & Components of Cost Accounting
This lesson will introduce what cost accounting is and provide a definition. It will introduce cost elements and how costs are classified in cost accounting, then compare and contrast cost accounting to financial accounting.
2. Transactions Costs in Economics: Definition, Theory & Examples
In this lesson, we'll discuss transactions costs and their role in contributing to the economy. Our discussion will include definitions of key terms, the theory of transaction costs, and the different types of transaction costs.
3. Period Costs in Accounting: Definition & Examples
In this lesson, we'll discuss the importance of accurately determining period costs. We'll also review accounting principles associated with classifying costs and examine types of period costs.
4. Product Costs in Accounting: Definition & Examples
This lesson provides the definition and example of what product costs are, how they differentiate from period costs, and how they are used on a cost of goods manufactured schedule in relation to financial statements.
5. Cost Driver in Accounting: Definition, Analysis & Example
In this lesson, we will learn about cost drivers. We will define the term, look at examples, and learn the steps a company might take when analyzing a cost driver. The lesson will conclude with a summary and a quiz.
6. Standard Cost vs. Job Order Cost Accounting Systems
A company's inventory can be valued using different methods. The method you choose depends upon the type of goods that the business is producing. Two such costing methods are job order costing and standard costing.
7. Sunk Costs: Definition & Examples
In this lesson, sunk costs are defined and evaluated in the context of company decision making. Concepts are illustrated with examples from the construction industry and a small messenger business.
8. Cost-Benefit Analysis: Payback & Accounting Rate of Return
In business, there are a variety of methods used to calculate the expected return on an investment. In this lesson, we'll discuss two common methods: payback period and the accounting rate of return.
9. Opportunity Cost: Definition, Calculations & Examples
This lesson discusses opportunity costs, a central idea of economics. In addition to examining the general idea of opportunity costs, it also looks at the role of explicit and implicit costs to firms.
10. Implicit Costs: Definition & Examples
Not all of the costs a business must consider can be calculated and tracked on a monthly basis. This lesson introduces the concept of implicit costs, including examples and how they differ from explicit costs.
11. Explicit Costs: Definition & Examples
Explicit costs have a direct effect on a business and on the amount of money a business has available. This lesson explains explicit costs and gives two different examples of explicit costs in a business.
12. Accounting Profit: Definition & Formula
In this lesson, you'll learn what accounting profit is and why it's important in the world of finance and business. You'll also examine some of the basic terminologies and the most common financial statements that include accounting profit.
13. How to Calculate Economic Profit: Definition & Formula
Learn what economic profit is and how it's different from standard accounting profit in this lesson. Find out the formula for calculating economic profit and why it's possible to have a positive accounting profit and a negative economic profit.
14. Profit Maximization: Definition, Equation & Theory
What is profit maximization? Why would we want to maximize our profits, rather than revenues or sales? In this lesson we'll discuss what profit maximization is, how to calculate it, and why it's important to understand the concept.
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Other chapters within the Economics 101: Principles of Microeconomics course
- Introduction to Microeconomics
- Supply and Demand in Microeconomics
- Consumer Behavior & Microeconomics
- Producers in Microeconomics
- Business Structures & Barriers to Entry
- Market Structures in Economics
- Scarce Economic Resource Markets
- Business Technology, Research & Development
- Government Issues in Microeconomics
- Studying for Economics 101