Distinguish between accounting costs and Economics costs. Explain giving suitable examples.
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Economic cost includes opportunity costs. Accounting costs do not.
For example. Suppose you can manufacture product A or product B. A costs $50 and can be sold for $100. B can be made for $75 and sold for $100.
Accounting cost the opportunity cost is represented by the foregone accounting profit that could be earned by the project not taken.
Example: The accounting cost of A is $50 and the accounting cost of B is $75. The economic cost of A is 50+(100-75)=75 and the economic cost of B is 75+(100-50)=125.
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Answer:
Economic cost includes opportunity costs. Accounting costs do not.
For example. Suppose you can manufacture product A or product B. A costs $50 and can be sold for $100. B can be made for $75 and sold for $100.
Accounting cost the opportunity cost is represented by the foregone accounting profit that could be earned by the project not taken.
Example: The accounting cost of A is $50 and the accounting cost of B is $75. The economic cost of A is 50+(100-75)=75 and the economic cost of B is 75+(100-50)=125.
Explanation:
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