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Managing Costs

Managing Costs. Managing Costs: Overview. Forward-looking Marginal/Incremental to decision Excess Capacity: free resources? Scope, Scale, Learning. Implicit Costs & Tradeoffs. Implicit Costs. Costs not appearing on income statement but impacting items on it Implicit costs are costly

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Managing Costs

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  1. Managing Costs

  2. Managing Costs: Overview • Forward-looking • Marginal/Incremental to decision • Excess Capacity: free resources? • Scope, Scale, Learning

  3. Implicit Costs & Tradeoffs

  4. Implicit Costs • Costs not appearing on income statement but impacting items on it • Implicit costs are costly • Just as “real” as explicit costs • Forward-looking, not historical • Estimates of tradeoffs • Open for big errors

  5. Turnovers as Implicit Cost:John Wooden as Manager

  6. No Cost To Retained Earnings?

  7. Bias Toward Explicit Costs?Impact on Product Costly

  8. Common But Costly?Power of Habit/History

  9. Choosing Between Implicit Costs

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