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What are the advantages of globalization for developed countries?
Fall in the cost of products, increased choices of goods and availabilty of goods.
What is the average cost of instant loans?
The average cost of instant loan is around 15 to 30 dollars for every 100 dollars loan. However, instant loans are dangerous as it can cause one to fall into debt fast.
Is Janatorial Costs a fixed mixed or variable cost?
The three types of cost you are referring to are Fixed, Semi Variable and Variable Costs. On a well though out COA the janitorial costs would fall under administrative costs. Thus fixed.
Examples of law of diminishing returns?
Suppose that one kilogram of seed applied to a plot of land of a fixed size produces one ton of crop. You might expect that an additional kilogram of seed would produce an additional ton of output. However, if there are diminishing marginal returns, that additional kilogram will produce less than one additional ton of crop (ceteris paribus). For example, the second kilogram of seed may only produce a half ton of extra output. Diminishing marginal returns also implies that a third kilogram of seed will produce an additional crop that is even less than a half ton of additional output. Assume that it is one quarter of a ton. In economics, the term "marginal" is used to mean on the edge of productivity in a production system. The difference in the investment of seed in these three scenarios is one kilogram - "marginal investment in seed is one kilogram." And the difference in output, the crops, is one ton for the first kilogram of seeds, a half ton for the second kilogram, and one quarter of a ton for the third kilogram. Thus, the marginal physical product (MPP) of the seed will fall as the total amount of seed planted rises. In this example, the marginal product (or return) equals the extra amount of crop produced divided by the extra amount of seeds planted. A consequence of diminishing marginal returns is that as total investment increases, the total return on investment as a proportion of the total investment (the average product or return) decreases. The return from investing the first kilogram is 1 t/kg. The total return when 2 kg of seed are invested is 1.5/2 = 0.75 t/kg, while the total return when 3 kg are invested is 1.75/3 = 0.58 t/kg. Another example is a factory that has a fixed stock of capital, or tools and machines, and a variable supply of labor. As the firm increases the number of workers, the total output of the firm grows but at an ever-decreasing rate. This is because after a certain point, the factory becomes overcrowded and workers begin to form lines to use the machines. The long-run solution to this problem is to increase the stock of capital, that is, to buy more machines and to build more factories.
Who can start foreclosure?
"Foreclosure can be simply explained as follows: Suppose that you, as a loan borrower, failed to make a couple of your payments in time, so you fall behind the payment schedule. In this case, depending on the terms and conditions of your mortgage loan agreement, the lender has the right to start a legal process called "foreclosure" which may result in the termination of your rights to own the mortgaged property."
When marginal cost is less than the average total cost the average total cost is falling why?
as a marginal cost is the cost of the next product produced, if this is less than average cost, when you continue to produce more products the lower marginal cost will have an affect on the average and cause it to fall.
When marginal costs are below average cost at a given output one can deduce that if output increases what happens?
when marginal costs are below average cost at a given output, one candeduce that, if output increases dose average costs fall or marginal costs will fall
Why avc curve U shape?
Overall because of diminishing marginal returns. The marginal cost curve, MC, decreases until diminishing marginal returns set in and and it begins to increase. When the MC is below the AVC, the AVC must fall. When the MC is above the AVC, the AVC must rise. In otherwords, if the marginal cost is decreasing the average cost must be decreasing as well and vice versa.
Why would you eventually reach the point of negative marginal utility at an all-you-can-eat restaurant?
when we start eating, the level of hunger is high. but eventually our capacity to eat falls, thus the marginal utility at the all - you- can eat restaurant will fall.
What is the relationship between marginal productivity and marginal cost?
The marginal product curve is 'n' shaped because of the law of diminishing returns. As you add more units of a variable factor, at first, the marginal product rises, (this is because the fixed factor is under-utilised, so adding more units of the variable factor will increase the output from each additional unit). But after a certain point, the marginal product begins to fall, as the fixed factor input becomes diluted amongst workers and so you get less from each additional unit of the variable factor. For an example, re-read the above paragraph and replace the word variable factor with labour and fixed factor with capital. The marginal cost curve is the inverse of the marginal product curve - hence it is shaped like a 'u' or a 'Nike tick'. This is because if your marginal product is high - then your marginal costs are low. For example, if a firm must pay electricity for the time it takes to produce a unit, if the firm can produce the unit quicker (i.e. has a high marginal product) then the cost of electricity will be lower. Hence the inverse relationship between marginal cost and marginal product.
Will the property price in US go down in the future?
Mortage Rates are very low right now and if the rates start rising Property Values can easily start to fall.
The marginal cost mc curve always intersects the atc curve at its minimum point?
When marginal cost is below average total cost, the cost of an additional unit is lower than the average cost of all the units, so it causes average total cost to fall. If marginal cost is greater, the cost of an additional unit is higher, so average total cost will rise. So when they are equal, it will stay the same. Think of it like your GPA. Say ATC=your GPA (the average of all your grades), and MC=the grade in your next course (one particular grade). If you have a B average and get a C in your next course, your GPA will fall (like when MC is lower than ATC). If you have a B average and get an A, your GPA will rise (like when MC is higher than ATC). If you get a B in your next course, there won't be any change because it's the same as the average (like when ATC=MC).
What are the relationship between marginal cost and average total cost schedule?
Marginal cost is the cost incurred in producing an additional unit of a product. It is the cost per unit of a product as against the total cost. It is therefore the variable cost of producing one more unit of a product.Average total cost is the total cost of production at an activity level. it is the total cost of divided by the total production.Whiles marginal cost shows the cost incurred in producing an additional unit of a product, average cost shows the total cost of production per unit.Just a small addition to this thought:Think of the marginal cost as being at a point in time, whereas the average total cost is calculated over a period of time. As a result, marginal cost at any given point may be higher or lower than an average total cost.Quick example:ABC manufactures a product they call Widget AWidget A sells for a price of $20ABC sells 1,000 units of Widget AFixed costs for this production run are $5,000, regardless of # of units soldVariable costs are $12 per unitGross Revenues $20,000Fixed Cost Expense $ 5,000Variable Cost Expense $12,000Gross Profit $ 3,000Breakeven # of units can be calculated as follows:20x = 5000 + 12x. Solving for x gives 625 units to break even. At this point the Average Transaction Cost equals the selling price of $20 per unit. As each additional unit is produced the ATC will decrease since the only additional cost is the variable cost of $12 per unit. Therefore, in this very simple example, the MARGINAL COST of producing each unit OVER 625 would be the $12 variable cost expense. In the example above, at 1,000 units the Average Transaction Cost is $17 ($5 per unit for Fixed and $12 per unit for Variable), which is a decrease from the $20 ATC at break even.
When does rain fall from clouds?
When air is rising.
What is the tuition for mizzou?
~ $246 / credit hour (Missouri Resident) Fall 2008 Check current cost due to tuition always rising. http://cashiers.missouri.edu/cost.htm
What are the two types of intonation?
The answer is rising intonation and falling intonation
What is the Difference between Marginal Costing and Absorption Costing only headings?
Distinguish between marginal costing and absorption costing :- Marginal costing - definition :-Marginal costing distinguishes between fixed costs and variable costs as convention ally classified. The marginal cost of a product -" is its variable cost". This is normally taken to be; direct labour, direct material, direct expenses and the variable part of overheads. Marginal costing is formally defined as:- 'the accounting system in which variable costs are charged to cost units and the fixed costs of the period are written-off in full against the aggregate contribution. Its special value is in decision making'. (Terminology.) The term 'contribution' mentioned in the formal definition is the term given to the difference between Sales and Marginal cost. Thus MARGINAL COST = VARIABLE COST DIRECT LABOUR+DIRECT MATERIAL+DIRECT EXPENSE+VARIABLE OVERHEADS CONTRIBUTION SALES - MARGINAL COST :- The term marginal cost sometimes refers to the marginal cost per unit and sometimes to the total marginal costs of a department or batch or operation. The meaning is usually clear from the context.Theory of Marginal Costing :-The theory of marginal costing as set out in "A report on Marginal Costing" published by CIMA, London is as follows: - In relation to a given volume of output, additional output can normally be obtained at less than proportionate cost because within limits, the aggregate of certain items of cost will tend to remain fixed and only the aggregate of the remainder will tend to rise proportionately with an increase in output. Conversely, a decrease in the volume of output will normally be accompanied by less than proportionate fall in the aggregate cost. The theory of marginal costing may, therefore, by understood in the following two steps: - 1. If the volume of output increases, the cost per unit in normal circumstances reduces. Conversely, if an output reduces, the cost per unit increases. If a factory produces 1000 units at a total cost of $3,000 and if by increasing the output by one unit the cost goes up to $3,002, the marginal cost of additional output will be $.2. 2. If an increase in output is more than one, the total increase in cost divided by the total increase in output will give the average marginal cost per unit. If, for example, the output is increased to 1020 units from 1000 units and the total cost to produce these units is $1,045, the average marginal cost per unit is $2.25. It can be described as follows: Additional cost =Additional units $ 45 = $2.2520 The ascertainment of marginal cost is based on the classification and segregation of cost into fixed and variable cost. In order to understand the marginal costing technique, it is essential to understand the meaning of marginal cost. Marginal cost means the cost of the marginal or last unit produced. It is also defined as the cost of one more or one less unit produced besides existing level of production. In this connection, a unit may mean a single commodity, a dozen, a gross or any other measure of goods. For example, if a manufacturing firm produces X unit at a cost of $ 300 and X+1 units at a cost of $ 320, the cost of an additional unit will be $ 20 which is marginal cost. Similarly if the production of X-1 units comes down to $ 280, the cost of marginal unit will be $ 20 (300-280). The marginal cost varies directly with the volume of production and marginal cost per unit remains the same. It consists of prime cost, i.e. cost of direct materials, direct labor and all variable overheads. It does not contain any element of fixed cost which is kept separate under marginal cost technique. Marginal costing may be defined as the technique of presenting cost data wherein variable costs and fixed costs are shown separately for managerial decision-making. It should be clearly understood that marginal costing is not a method of costing like process costing or job costing. Rather it is simply a method or technique of the analysis of cost information for the guidance of management which tries to find out an effect on profit due to changes in the volume of output. There are different phrases being used for this technique of costing. In UK, marginal costing is a popular phrase whereas in US, it is known as direct costing and is used in place of marginal costing. Variable costing is another name of marginal costing. Marginal costing technique has given birth to a very useful concept of contribution where contribution is given by: Sales revenue less variable cost (marginal cost) Contribution may be defined as the profit before the recovery of fixed costs. Thus, contribution goes toward the recovery of fixed cost and profit, and is equal to fixed cost plus profit (C = F + P). In case a firm neither makes profit nor suffers loss, contribution will be just equal to fixed cost (C = F). this is known as break even point. The concept of contribution is very useful in marginal costing. It has a fixed relation with sales. The proportion of contribution to sales is known as P/V ratio which remains the same under given conditions of production and sales. The principles of marginal costing :- The principles of marginal costing are as follows. a. For any given period of time, fixed costs will be the same, for any volume of sales and production (provided that the level of activity is within the 'relevant range'). Therefore, by selling an extra item of product or service the following will happen. § Revenue will increase by the sales value of the item sold. § Costs will increase by the variable cost per unit. § Profit will increase by the amount of contribution earned from the extra item. b. Similarly, if the volume of sales falls by one item, the profit will fall by the amount of contribution earned from the item. c. Profit measurement should therefore be based on an analysis of total contribution. Since fixed costs relate to a period of time, and do not change with increases or decreases in sales volume, it is misleading to charge units of sale with a share of fixed costs. d. When a unit of product is made, the extra costs incurred in its manufacture are the variable production costs. Fixed costs are unaffected, and no extra fixed costs are incurred when output is increased. Features of Marginal Costing :-The main features of marginal costing are as follows: 1. Cost Classification :-The marginal costing technique makes a sharp distinction between variable costs and fixed costs. It is the variable cost on the basis of which production and sales policies are designed by a firm following the marginal costing technique. 2. Stock/Inventory Valuation :-Under marginal costing, inventory/stock for profit measurement is valued at marginal cost. It is in sharp contrast to the total unit cost under absorption costing method. 3. Marginal Contribution:- Marginal costing technique makes use of marginal contribution for marking various decisions. Marginal contribution is the difference between sales and marginal cost. It forms the basis for judging the profitability of different products or departments. Advantages and Disadvantages of Marginal Costing Technique :- Advantages :-_ 1. Marginal costing is simple to understand. 2. By not charging fixed overhead to cost of production, the effect of varying charges per unit is avoided. 3. It prevents the illogical carry forward in stock valuation of some proportion of current year's fixed overhead. 4. The effects of alternative sales or production policies can be more readily available and assessed, and decisions taken would yield the maximum return to business. 5. It eliminates large balances left in overhead control accounts which indicate the difficulty of ascertaining an accurate overhead recovery rate. 6. Practical cost control is greatly facilitated. By avoiding arbitrary allocation of fixed overhead, efforts can be concentrated on maintaining a uniform and consistent marginal cost. It is useful to various levels of management. 7. It helps in short-term profit planning by breakeven and profitability analysis, both in terms of quantity and graphs. Comparative profitability and performance between two or more products and divisions can easily be assessed and brought to the notice of management for decision making. Disadvantages:- 1. The separation of costs into fixed and variable is difficult and sometimes gives misleading results. 2. Normal costing systems also apply overhead under normal operating volume and this shows that no advantage is gained by marginal costing. 3. Under marginal costing, stocks and work in progress are understated. The exclusion of fixed costs from inventories affect profit, and true and fair view of financial affairs of an organization may not be clearly transparent. 4. Volume variance in standard costing also discloses the effect of fluctuating output on fixed overhead. Marginal cost data becomes unrealistic in case of highly fluctuating levels of production, e.g., in case of seasonal factories. 5. Application of fixed overhead depends on estimates and not on the actuals and as such there may be under or over absorption of the same. 6. Control affected by means of budgetary control is also accepted by many. In order to know the net profit, we should not be satisfied with contribution and hence, fixed overhead is also a valuable item. A system which ignores fixed costs is less effective since a major portion of fixed cost is not taken care of under marginal costing. 7. In practice, sales price, fixed cost and variable cost per unit may vary. Thus, the assumptions underlying the theory of marginal costing sometimes becomes unrealistic. For long term profit planning, absorption costing is the only answer. Presentation of Cost Data under Marginal Costing and Absorption Costing :- Marginal costing is not a method of costing but a technique of presentation of sales and cost data with a view to guide management in decision-making. The traditional technique popularly known as total cost or absorption costing technique does not make any difference between variable and fixed cost in the calculation of profits. But marginal cost statement very clearly indicates this difference in arriving at the net operational results of a firm. Following presentation of two Performa shows the difference between the presentation of information according to absorption and marginal costing techniques: MARGINAL COSTING PRO-FORMA £ £ Sales Revenue xxxxx Less Marginal Cost of Sales Opening Stock (Valued @ marginal cost) xxxx Add Production Cost (Valued @ marginal cost) xxxx Total Production Cost xxxx Less Closing Stock (Valued @ marginal cost) (xxx) Marginal Cost of Production xxxx Add Selling, Admin & Distribution Cost xxxx Marginal Cost of Sales (xxxx) Contribution xxxxx Less Fixed Cost (xxxx) Marginal Costing Profit xxxxx ABSORPTION COSTING PRO-FORMA £ £ Sales Revenue xxxxx Less Absorption Cost of Sales Opening Stock (Valued @ absorption cost) xxxx Add Production Cost (Valued @ absorption cost) xxxx Total Production Cost xxxx Less Closing Stock (Valued @ absorption cost) (xxx) Absorption Cost of Production xxxx Add Selling, Admin & Distribution Cost xxxx Absorption Cost of Sales (xxxx) Un-Adjusted Profit xxxxx Fixed Production O/H absorbed xxxx Fixed Production O/H incurred (xxxx) (Under)/Over Absorption xxxxx Adjusted Profit xxxxx Reconciliation Statement for Marginal Costing and Absorption Costing Profit $ Marginal Costing Profit xx ADD(Closing stock - opening Stock) x OAR xx = Absorption Costing Profit xx Where OAR( overhead absorption rate) = Budgeted fixed production overheadBudgeted levels of activities Marginal Costing versus Absorption Costing :- After knowing the two techniques of marginal costing and absorption costing, we have seen that the net profits are not the same because of the following reasons: 1. Over and Under Absorbed Overheads :- In absorption costing, fixed overheads can never be absorbed exactly because of difficulty in forecasting costs and volume of output. If these balances of under or over absorbed/recovery are not written off to costing profit and loss account, the actual amount incurred is not shown in it. In marginal costing, however, the actual fixed overhead incurred is wholly charged against contribution and hence, there will be some difference in net profits. 2. Difference in Stock Valuation :- In marginal costing, work in progress and finished stocks are valued at marginal cost, but in absorption costing, they are valued at total production cost. Hence, profit will differ as different amounts of fixed overheads are considered in two accounts. The profit difference due to difference in stock valuation is summarized as follows: a. When there is no opening and closing stocks, there will be no difference in profit. b. When opening and closing stocks are same, there will be no difference in profit, provided the fixed cost element in opening and closing stocks are of the same amount. c. When closing stock is more than opening stock, the profit under absorption costing will be higher as comparatively a greater portion of fixed cost is included in closing stock and carried over to next period. d. When closing stock is less than opening stock, the profit under absorption costing will be less as comparatively a higher amount of fixed cost contained in opening stock is debited during the current period. The features which distinguish marginal costing from absorption costing are as follows. :- a. In absorption costing, items of stock are costed to include a 'fair share' of fixed production overhead, whereas in marginal costing, stocks are valued at variable production cost only. The value of closing stock will be higher in absorption costing than in marginal costing. b. As a consequence of carrying forward an element of fixed production overheads in closing stock values, the cost of sales used to determine profit in absorption costing will: i. include some fixed production overhead costs incurred in a previous period but carried forward into opening stock values of the current period; ii. exclude some fixed production overhead costs incurred in the current period by including them in closing stock values. In contrast marginal costing charges the actual fixed costs of a period in full into the profit and loss account of the period. (Marginal costing is therefore sometimes known as period costing.) c. In absorption costing, 'actual' fully absorbed unit costs are reduced by producing in greater quantities, whereas in marginal costing, unit variable costs are unaffected by the volume of production (that is, provided that variable costs per unit remain unaltered at the changed level of production activity). Profit per unit in any period can be affected by the actual volume of production in absorption costing; this is not the case in marginal costing. d. In marginal costing, the identification of variable costs and of contribution enables management to use cost information more easily for decision-making purposes (such as in budget decision making). It is easy to decide by how much contribution (and therefore profit) will be affected by changes in sales volume. (Profit would be unaffected by changes in production volume). In absorption costing, however, the effect on profit in a period of changes in both: i. production volume; and ii. sales volume;is not easily seen, because behaviour is not analysed and incremental costs are not used in the calculation of actual profit. Limitations of Absorption Costing :- The following are the criticisms against absorption costing: 1. You might have observed that in absorption costing, a portion of fixed cost is carried over to the subsequent accounting period as part of closing stock. This is an unsound practice because costs pertaining to a period should not be allowed to be vitiated by the inclusion of costs pertaining to the previous period and vice versa. 2. Further, absorption costing is dependent on the levels of output which may vary from period to period, and consequently cost per unit changes due to the existence of fixed overhead. Unless fixed overhead rate is based on normal capacity, such changed costs are not helpful for the purposes of comparison and control. The cost to produce an extra unit is variable production cost. It is realistic to the value of closing stock items as this is a directly attributable cost. The size of total contribution varies directly with sales volume at a constant rate per unit. For the decision-making purpose of management, better information about expected profit is obtained from the use of variable costs and contribution approach in the accounting system. Summary Marginal cost is the cost management technique for the analysis of cost and revenue information and for the guidance of management. The presentation of information through marginal costing statement is easily understood by all mangers, even those who do not have preliminary knowledge and implications of the subjects of cost and management accounting. Absorption costing and marginal costing are two different techniques of cost accounting. Absorption costing is widely used for cost control purpose whereas marginal costing is used for managerial decision-making and control.
