cost of living

Examples of cost of living in the following topics:

• Lab 1: Regression (Distance from School)

  • Use 8 members of your class for the sample.
  • Collect bivariate data (distance an individual lives from school, the cost of supplies for the current term).
  • "cost. " Plot the points on the graph.
  • For a person who lives 8 miles from campus, predict the total cost of supplies this term: b.
  • For a person who lives 80 miles from campus, predict the total cost of supplies this term:

• Amortization of Intangible Assets

  • The costs of intangible assets with identifiable useful lives are amortized over their economic/legal life.
  • Under US GAAP, the cost of intangible assets are either amortized over their respective useful/legal lives, or are tested for impairment on an annual basis.
  • Amortization is the systematic write-off of the cost of an intangible asset to an expense, which effectively allocates a portion of the intangible asset's cost to each accounting period in the economic or legal life of the asset (an amortization expense).
  • Only recognized intangible assets with finite useful lives are amortized.
  • Firms may only include the immediate purchase costs of an intangible asset, which do not include the costs associated with internal development or self-creation of the asset.

• Cost-Benefit Analysis

  • Benefits and costs are expressed in monetary terms, and are adjusted for the time value of money, so that all flows of benefits and costs over time are expressed on a common basis in terms of their net present value.
  • The benefits side of the analysis might include time savings for passengers who can now avoid traffic, an increase in the number of passenger trips (as more people could now use the road), and lives saved by dint of fewer car accidents.
  • The cost side of the analysis would include the cost of land that must be acquired prior to construction, construction, and maintenance.
  • The benefits of a highway expansion project might include time savings for passengers, additional passenger trips, and saved lives.
  • Explain how to determine the net cost/benefit of providing a public good

• Accounting Perspectives on Long-Lived Assets

  • All money that is spent to get the asset up and running is capitalized as part as the cost of the asset.
  • Figuring the cost of an item takes into consideration more than just the purchase price.
  • Added to that would be any taxes paid, less any discounts received, cost of transportation that a company pays to bring the item to where it needs to go, and the cost of getting it ready for use.
  • So, for example, the cost of land would include any attorney fees, real estate fees, title fees, back taxes that need to be paid, and the cost of preparation for the lands intended use.
  • Basically any costs that are necessary to get an item or land ready to use for business is included in the cost of the item.

• Average and Marginal Cost

  • It is the cost of producing one more unit of a good.
  • Marginal cost includes all of the costs that vary with the level of production.
  • The amount of marginal cost varies according to the volume of the good being produced.
  • An example of calculating marginal cost is: the production of one pair of shoes is $30.
  • The marginal cost of producing the second pair of shoes is $10.

• Types of Costs

  • Variable costs change according to the quantity of goods produced; fixed costs are independent of the quantity of goods being produced.
  • It consists of variable costs and fixed costs.
  • Total cost is the total opportunity cost of each factor of production as part of its fixed or variable costs .
  • Variable costs are also the sum of marginal costs over all of the units produced (referred to as normal costs).
  • An example of a fixed cost would be the cost of renting a warehouse for a specific lease period.

• Economic Costs

  • An example of economic cost would be the cost of attending college.
  • So, the economic cost of college is the accounting cost plus the opportunity cost.
  • An example of economic cost would be the cost of attending college.
  • So, the economic cost of college is the accounting cost plus the opportunity cost.
  • Cost curves: a graph of the costs of production as a function of total quantity produced.

• Analyzing Intangible Assets

  • Examples of intangible assets with identifiable useful lives include copyrights and patents.
  • Trademarks and goodwill are examples of intangible assets with indefinite useful lives.
  • Some costs with respect to intangible assets must be capitalized rather than treated as deductible expenses.
  • Treasury regulations generally require capitalization of costs associated with acquiring, creating, or enhancing intangible assets.
  • Research and development (R&D) costs are not in and of themselves intangible assets.

• Externality Impacts on Efficiency

  • An externality is a cost or benefit that results from an activity or transaction and affects a third party who did not choose to incur the cost or benefit .
  • Manufacturing plants emit pollution which impacts individuals living in the surrounding areas.
  • An example of a positive externality would be an individual who lives by a bee farm.
  • Externalities directly impact efficiency because the production of goods is not efficient when costs are incurred due to damages.
  • It also shows the economic costs that are associated with externalities.

• Cost of capital

  • The cost of capital refers to the cost of the money used to pay for the capital.
  • In order to determine a company's cost of capital, the cost of debt and the cost of equity must be calculated.
  • One way of combining the cost of debt and equity to generate a single cost of capital number is through the weighted-average cost of capital (WACC).
  • where D is the value of debt in the company, E is the value of equity, rd is the cost of debt, t is the tax rate, and re is the cost of equity.
  • The cost of capital is the cost of the money used to finance the plant.