Little Enemies

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Little Enemies

On March 21, 2007, Posted by , In business,economics,productivity, With No Comments

Sometimes not that little, we can find them when analysing an investment, trying to sum up the figures, or pricing an item; they are the hidden costs. For cost accountants they will be those little enemies the technical department can be misinforming about, or just forgetting, like for example forgotten processes not accounted for or unweighted ones. However, even worse than them are the bigger enemies: the opportunity costs!.

“Opportunity Costs”, I can remember, was the first lesson I had in faculty (well, in fact the first lesson was what “Economics” was, but that doesn’t count as a lesson!). Summarising: they are the best alternative use of the resources you’re going to employ in the analysed whatever. So, for example, if you are pricing a product, your opportunity cost is the best price you could get by producing other most valuable product (i.e. you’re producing butter and you could be producing cheese). So what?, take it into account, because the introduction of this variable into the analysis can make a difference; moreover, be careful, because real life, brick and mortar, is not pen and paper. Be aware!.