Comparison between Types of Costs
- Sunk Cost versus Incremental Cost
The sunk cost is a cost that can be acquired over the time, however, cannot be reclaimed and with the increase or decrease of the production, there is no change in the money that are paid with the starting of services. By the increases in another enterprise or the addition in added production, the incremental cost can be increased.
Fixed Cost versus Variable Cost
The fixed cost is the cost amount that is referred to the monthly amount as the same amount that has to be paid out in, the example includes wages or rent because it relies on the amount. The variable cost is the cost that shows a discrepancy based on the level of product or services when it is put out, however, the cost may be change example increasing and decreasing when depends on productions.
Incremental Cost versus Marginal Cost
An incremental cost is the additional unit cost that increases with production or hours, it is also the cost accrual, which associated with the extra costs, it can be the increase in the revenue.
Opportunity Cost versus Out-of-pocket Cost
The opportunity cost could be explained as an alternate cost because there can be the focus by the investor in choosing a route or the investments. On the other hand, while choosing one investment the opportunity cost can be giving up and there could be the different type of investment example, the pocket cost that is out of any expense and comes directly out when the opportunity cost is invested. It is the current finances or the immediate revenue from that focuses on the income during the setup time but not at the income, which is out of pocket costs.
“Relevant Costs” and “Irrelevant Costs” to a Business Decision
The relevant cost can be explained as the marginal cost, opportunity due, variable cost or the incremental costs. However, these costs are associated with the company management decisions because the decisions can be taken for betterment. In this way, the company fixed cost and opportunity cost can be viewed as irrelevant because the company management can take the specific decision.
With the production of more products the average cost can be decreased when the products are being produced. However, the economies of scale can be attainable with the associated overhead costs because of the overtime of the production increases.