The Costs: A Production Manager should know

Followings are the different types of cost, which a Production Manager should know:

Accounting Cost
All these expenses incurred by a producer that enter the accounts of the accountant in course of production is known as accounting cost. An entrepreneur pays wages to the labour employed, rent for hiring land and s, interest on the capital borrowed, prices for raw material, transport, electricity etc. for doing the business. All these expenses are placed in the accounts.


Economic Cost
Economic cost takes into account the accounting cost of his production and the costs arising out of his personal labour and capital investment. His personal labour and capital invested could have earned remuneration of otherwise employed somewhere else. But these remunerations are not received by the entrepreneur himself. When these remunerations are added in the accounting cost, this constitutes economic costs.

Historical Cost
In accounting, historical costs is the original monetary value of an economic item. Historical cost is based on the stable measuring unit assumption. In some circumstances, assets and liabilities may be shown at their historical cost, as if there had been no change in value since the date of acquisition. The balance sheet value of the item may therefore differ from the “true” value.
A measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. The historical-cost method is used for assets in the U.S. under Generally Accepted Accounting Principles (GAAP).
For example, say the main headquarters of a company