What Is Average Costing?
Average cost refers to the average level of cost consumption in a certain range and period. The average cost is always for a certain product or service. Changes in the average cost of product production or service provision in a certain period often reflect changes in the overall level of cost management within a certain range. The average cost of different periods may vary greatly. Through comparative analysis, you can understand the overall level of cost changes and point the way for in-depth analysis.
average cost
- The average cost is divided into industry average cost and enterprise average cost. Industry average cost
- There are many ways to represent average cost, such as:
- The average cost is the cost per unit of output, specifically:
- average
- I. Definition
- I. Definition
- Relationship between long-term and short-term average cost curves
- 1, constituting the long-term average cost curve: the curve of the long-term average cost curves of each short-term average cost package which, therefore, known as the long-term average cost curve envelope curve. Each short-term average cost curve and long-term average cost curve each have a tangent point. At the lowest point of the long-term average cost curve, the lowest point of a short-term average cost curve is tangent to this point. To the left, the point to the left of the lowest point of each short-term average cost curve is tangent to the long-term average cost curve. To the right, the point to the right of the lowest point of the short-term average cost curve is tangent to the long-term average cost curve. In the long run, producers make production plans according to this curve and determine the scale of production. Therefore, this long-term average cost curve is also called the planning curve.
- 2, wherein the average long-term cost curve:
- Long-run average cost curve and the short-term average cost curve are the first to fall and then rise in a "U" shaped curve. But the difference is that the long-run average cost curve in terms of the falling or rising are relatively flat, indicating that the average cost in the long run either reduce or increase the changes are slow, which is due to all the factors of production in the long run can be adjusted at any time , increments from decreasing returns to scale returns to scale to have a longer phase of constant returns to scale, and in the short term, the constant returns to scale stage is very short, not even.