Costs are important to all businesses. Costs can be divided into four general classes:
Absolute – which measures the loss in value of assets.
Relative – which involves a comparison between the chosen course of action and the course of action that was rejected.
Fixed costs – incurred only once and as additional units of production are produced, the unit costs fall. Examples would be road access costs and equipment move-in costs.
Variable costs – vary per unit of production. Examples include the cost per cubic meter of excavated dirt, per cubic meter of wood yarded, and so on.
The cost of the alternative action – the action not taken – is often called the “opportunity cost”.
Accountants are primarily concerned with absolute costs. On the other hand, planners and managers need to be concerned with the alternative costs – the cost of the lost opportunity. Management has to be able to make comparisons between the policy that should be chosen and the policy that should be rejected. Such comparisons require the ability to predict costs, rather than merely record costs.
The analysis of costs is of paramount importance to planners and managers. What they need are the straight numbers…something to help them keep their goals clear and understand what is possible and what is likely to work. This is where FreshVu2Go can help anyone seen what they need to see when they need to see it. From anywhere, they can tap into the cloud and see their numbers in real time.
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