MANAGERIAL ECONOMICS 11th Edition - Cameron ….pptVIP

MANAGERIAL ECONOMICS 11th Edition By Mark Hirschey Cost Analysis and Estimation Chapter 9 Chapter 9OVERVIEW What Makes Cost Analysis Difficult Opportunity Cost Incremental and Sunk Costs in Decision Analysis Short-run and Long-run Costs Short-run Cost Curves Long-run Cost Curves Minimum Efficient Scale Firm Size and Plant Size Learning Curves Economies of Scope Cost-volume-profit Analysis Chapter 9KEY CONCEPTS historical cost current cost replacement cost opportunity cost explicit cost implicit cost incremental cost profit contribution sunk cost cost function short-run cost functions long-run cost functions short run long run planning curves operating curves fixed cost variable cost short-run cost curve long-run cost curve economies of scale cost elasticity capacity minimum efficient scale multiplant economies of scale multiplant diseconomies of scale learning curve economies of scope cost-volume-profit analysis breakeven quantity What Makes Cost Analysis Difficult? Link Between Accounting and Economic Valuations Accounting and economic costs often differ. Historical Versus Current Costs Historical cost is the actual cash outlay. Current cost is the present cost of previously acquired items. Replacement Cost Cost of replacing productive capacity using current technology. Opportunity Cost Opportunity Cost Concept Opportunity cost is foregone value. Reflects second-best use. Explicit and Implicit Costs Explicit costs are cash expenses. Implicit costs are noncash expenses. Incremental and Sunk Costs in Decision Analysis Incremental Cost Incremental cost is the change in cost tied to a managerial decision. Incremental cost can involve multiple units of output. Marginal cost involves a single unit of output. Sunk Cost Irreversible expenses incurred previously. Sunk costs are irrelevant to present decisions. Short-run and Long-run Costs How Is the Operating Period Defined? At least one input is fixed in the short run. All inputs are variable in the long run. Fixe