Concept of costs

It is proper examine the different cost concepts which are useful in managerial decision making :
Accounting costs economics costs:The entrepreneur pays for the factors employed in production in the form of wages,interest,rent, and prices for raw materials,fuel and power.All these are included in cost of production.An accounting will take into account only the payments and charges made by the entrepreneur to the suppliers of various productive services.
The economist's view of cost in different.The entrepreneur invests his own capital,time,managerial talent in business.In the absence of his own business,he would have employed his resources in others business and benefited.The economists,therefor,includes in his cost of production the normal return on money capital invested by the entrepreneur him self and the wages or salary he cloud have earned inf worked for others.Likewise,money rewards for the factors owned and employed in his own business are also included by the economists in the cost of population.
Thus,accounting cost is the costs that cash payments.Economic costs consists of not only all accounting costs but also money on capital,service and mother factors the entrepreneur could have earned if he had invested in next best alternative uses.The accounting costs which is on contractual cash payment made by the firm to factor owners is a also called the explicit cost.On the other hand,the payments made for own service and factors is called implicit or imputed costs.The managerial decision making should be based on economic costs since the economic costs show the real cost of production of a project.