Accounting Cost & Economic Cost

Accounting Cost（会计成本）

It includes the explicit cost which is shown on the accounting book.

It records all expenditures which are actually incurred of a firm, such as the material, machine, labor, interest.

Economic Cost（经济成本）

It includes both explicit cost and implicit cost which measures the value of input resources by the opportunity cost. 

We should concern economic cost in the engineering economic decisions.

Cash Cost & Book Cost

Cash Cost：Expenses which involve payment of cash.

Labor cost

Management cost

Book Cost：Expenses which are not payable in cash, i.e., the payments that firm pays it to itself.

Depreciation cost

Opportunity Cost & Sunk Cost

Opportunity Cost（机会成本）

Opportunity cost is equal to the revenues of the best rejected opportunity due to selecting and putting resources on one specific project.

It must be considered in the economic decisions.

Sunk Cost（沉没成本）

Cost occurred in the past or promised to be paid.

Sunk cost has no difference on selecting alternatives in the future. It will not be involved in the economic decisions.

Direct Cost & Indirect Cost

Direct Cost: Cost reasonably to be allocated to a work activity.

Labor cost

Material cost

Machine cost

Indirect Cost: Cost difficultly to be attributed to a work activity.

Overhead (Management cost)

Marketing cost

Fixed Cost & Variable Cost

Fixed Cost/Capacity Cost: Cost unaffected by changes of the quantity of product.

Machine cost, Insurance, Interest, Tax

Management cost/Overhead

Variable Cost: Cost changed associated with changes of the quantity of product.

Raw materials

Fuel, oils and lubricants, hydraulics fluid, grease, filters

Average Cost & Marginal Cost

Average Cost/Unit Cost: Cost per unit, including both fixed and variable costs.

TC — The summation of fixed cost and variable cost;

Q — Quantity of the product.

Marginal Cost (边际成本):  Added cost that results from the increase of output by a single unit.