Suppose a company has the following costs:
Labor $400
Equipment $300
Materials $100
A)What is the total accounting cost?
B)What is the total economic cost?
In general, accounting costs are the dollars paid for goods and services. In your example $800. Economic costs are expressed in terms of opportunity costs. I don't believe you have provided enough info to determine this. However, economic costs would, likely but not a sure thing, be less than accounting costs.
To calculate the total accounting cost, you simply add up all the costs associated with the company:
Labor: $400
Equipment: $300
Materials: $100
Total accounting cost = $400 + $300 + $100
Total accounting cost = $800
So, the total accounting cost is $800.
On the other hand, calculating the total economic cost requires considering not only the explicit costs paid for goods and services but also the opportunity costs, which represent the value of the next best alternative that is forgone.
In your example, you haven't provided any information about the opportunity costs or the value of the next best alternative, so it's not possible to determine the total economic cost precisely.
However, in general, the total economic cost is likely to be less than the total accounting cost. This is because the economic cost takes into account the opportunity costs, which could include factors like the value of the owner's time, the foregone income from alternative uses of resources, or any other potential costs that are not explicitly accounted for.
So, to determine the total economic cost, you would need to take into account the opportunity costs associated with the company's resources and decisions. But without more information, we cannot calculate it accurately for this specific case.