Wednesday, November 28, 2007

Various Cost Concepts




Fixed Cost - a cost that does not vary with output.

Sunk Cost - a cost that once incurred can't be recovered.

Specific Assets - Assets that are tooled for a particular purpose. The resale value of these assets are low relative to the install cost because they must be re-tooled for their next use. Specific assets are one explanation for sunk costs.

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