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'Step Costs' Business expenses that are constant for a given level of activity, but increase or decrease once

a threshold is crossed. Step costs are those costs that change when a business' production levels increase or decrease. When depicted on a graph, these types of expenses will be represented by a stairstep pattern. For example, a coffee shop might be able to serve 30 customers an hour with one employee. If the shop receives anywhere from zero to 30 customers per hour, it will only need to pay the cost of having one employee. If the shop begins receiving 31 or more customers per hour, it must hire a second employee, increasing its costs of doing business. 'Semi-Variable Cost' A cost composed of a mixture of fixed and variable components. Costs are fixed for a set level of production or consumption, becoming variable after the level is exceeded. Also known as a "semi-fixed cost." This type of cost is variable in the sense that greater levels of production increase total cost. If no production occurs, then a fixed cost is still incurred. Labor costs in a factory are semi-variable. The fixed portion is the wage paid to workers for their regular hours. The variable portion is the overtime pay they receive when they exceed their regular hours.

MIXED COST: The term mixed costs often refers to the behavior of costs and expenses. Mixed costs consist of a fixed component and a variable component. The annual expense of operating an automobile is a mixed cost. Some of the expenses are fixed, because they do not change in total as the number of annual miles change. Think insurance, parking fees, and some depreciation. Other expenses are variable, because they will increase for the year when the miles driven increase (and will decrease when the miles driven decrease). Think gas, oil, tires, and some depreciation.

The algebraic formula for a mixed cost is y = a + bx, where y is the total cost, a is the fixed cost per period, b is the variable rate per unit of activity, and x is the number of units of activity. For the annual expense of operating an automobile, the fixed cost, a, might be $5,000 per year; the variable rate, b, could be $0.20; and the number of units of activity, x, might be 15,000 miles per year. With these hypothetical assumptions, the annual expense, y, would be $8,000. If x were 10,000 miles, the annual expense y would be $7,000.

Sunk Cost: A sunk cost is an expense that cannot be recouped. Mark Hirschy, author of the book, Fundamentals of Managerial Economics, explains that sunk costs should not factor into a decision when deciding between alternatives. For example, say a person spent $50,000 on a degree in education and earns $60,000 as a teacher. She is later offered a job in marketing that pays her $80,000. Though she may be tempted to factor in her education degree as reason to stay in her current teaching job, her $50,000 degree is regarded as a sunk cost. She already spent this money, and it cannot be recouped. In this case, she should only compare the respective salaries of the positions. If all else is held equal, she should pursue the marketing job. Opportunity Cost: An opportunity cost is the value of an alternative choice. Though the word cost usually equates to a numerical value, like a dollar figure, this is not always the case. William Baumol and Alan Blinder, authors of the book, "Economics: Principles and Policy," state that an opportunity cost calculates intangible things like time, location and job satisfaction. They explain opportunity costs are what you give up to follow one course of action. For example, a college graduate is deciding between a job as a tech consultant in Seattle or an investment broker in New York City. If the grad pursues the investment broker position, the opportunity costs of foregoing the job in Seattle could be a slower pace of life, $10,000 higher salary and lower costs of living like rent and food.

Marginal Cost:

A marginal cost is the amount it takes to produce one more item. Under this view of costs, they vary along the production line and in most cases the cost to produce a good reduces over time. Intuitively, this makes sense: the more proficient you become at producing a good, the faster you can do it and less waste is produced. The savings in labor and material as you achieve economies of scale means the cost of production usually decreases. The way economists find the marginal cost is by taking the derivative of the total costs as it relates to the total output. OTHER TYPES OF COST: Up-front costs comprise the initial investments and expenses necessary to implement MSW services. These include public education and outreach, land acquisition, permitting, and building construction or modification. Operating costs are the expenses of managing MSW on a daily basis, including operations and maintenance, capital costs, debt service, and any unexpected costs. Back-end costs include expenditures to properly wrap up operations and take proper care of landfills and other MSW facilities at the end of their useful lives. Costs include site closure, building/equipment decommissioning, post closure care, and retirement/health benefits for current employees.

Remediation costs at inactive sites include investigation, containment, and cleanup of known releases and closure and post closure care at inactive sites. Many local governments have inactive MSW landfills that require "corrective action" for known contamination of ground water, soil, or surface water. These remediation costs can be relatively well estimated, though with somewhat more uncertainty than other types of engineering projects such as road building. Including these costs in FCA is a matter of choice. The decision to include remediation costs depends on the intended use of the FCA information. For example, if you are using FCA to document the revenue needs of an MSW program, you might want to include costs entailed by inactive sites. However, if you intend to use FCA to reveal the current economics (e.g., cost per ton) of current MSW management or compare your performance to other communities or state benchmarks, you might want to exclude inactive sites from such calculations.

Contingent costs are costs that might or might not be incurred at some point in the future. Examples include the costs of remediating unknown or future releases of pollutants, such as leaks from currently operating municipal landfills. Contingent costs also include the liability costs of compensating for undiscovered or future damage to property or persons adversely affected by MSW services. Both of these types of contingent costs can be projected, but not very precisely. (In contrast, where there is a known need to remediate, costs can be projected much more precisely.)

Environmental costs are the costs of environmental degradation that cannot be easily measured or remedied, are difficult to value, and are not subject to legal liability. To truly capture all of the important life-cycle cost elements, some people advocate assessing the upstream and downstream environmental costs of resource use, pollution, and waste generated by providing goods and services.

Social costs are adverse impacts on human beings, their property and welfare that cannot be compensated through the legal system. Social costs (also termed "social externalities") might include the impacts of MSW transport on neighborhoods along the routes taken, as well as the impacts of MSW facilities themselves. Adverse effects on property values, community image, and aesthetics, as well as the increase of noise, odor, and traffic all contribute to social costs.

MAUFACTURING COST: Manufacturing costs are broken down into three categories: direct materials, direct labor, and manufacturing overhead. Direct material costs are those tied to the products your company purchases to make the products they sell. That could be chicken for Kentucky Fried Chicken restaurants or seats for an airplane like an Airbus.

Direct labor manufacturing costs pertains to the monies paid to employees who produce your company's products. Manufacturing overhead costs include anything needed to produce the product in the manufacturing facility besides the direct materials or direct labor costs. For example, electrical expenses would be a manufacturing overhead cost. Product and Period Costs:

Manufacturing costs are also known as product costs. But there are nonmanufacturing costs, too, that are experienced in order to operate a business.These managerial accounting types of costs are known as period costs and include sales commissions as well as the cost to operate office space for administrative personnel that work for the company.

Variable and Fixed Costs:

Some of the costs incurred to operate a business will be the same amount every month. Those fixed costs, like bank loans on plant equipment or land and building purchases will not fluctuate every month and can be more easily budgeted. Administrative salaries would fall into this category too.

Variable costs, on the other hand, are those business expenses that can't really be budgeted due to their changing amounts each week or month. Costs that fall into this category include plant employee salaries, which vary depending upon the number of hours worked and if overtime is involved. Another variable cost would be raw material purchases, which vary depending upon the amount of sales orders taken within the month. Direct and Indirect Costs

Two managerial accounting types of costs, direct and indirect, pertain to whether a cost can be traced specifically to a cost object. For example, if

a raw material of eggs is required for the making of a particular food item, it would be considered a direct cost. If the egg would be used in one of several types of baked goods made by the manufacturer, it would be considered an indirect cost, since it can't be tied specifically to one object.

Differential Cost

In managerial accounting, sometimes the manager must decide between two options. Both options will be reviewed and the best of the two is, hopefully, chosen as the winning solution. When comparing these two business options, costs will be compared to see which one is more cost-efficient. This comparison of costs for both options being considered is known as differential cost.

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