Question

How does one calculate accounting costs?

Answer 1

Accounting Cost is calculated by taking into consideration the amount spent on Factor services not owned by the owner of the business unit.

Explanation:

Accounting costs are the payments made by an entrepreneur to the suppliers of various productive factors. Accounting Cost is also called as Explicit Cost. The accounting costs are, those costs, which are directly paid out or accounted for by the producer. Some of the items of the Accounting Cost are -

1. Wages paid to the labourers
2. Money spent on raw materials
3. Expenditure on fuel and power
4. Rent paid for the building hired for the production work
5. The rate of interest paid
6. Taxes paid.