Applied cost is a term to denote a cost that has been estimated or partially estimated. It is common for costs such as overhead to be estimated for the purposes of decision making. For example, if you want to model the profitability of a new product you need to make approximations for overhead costs such as the operation of a factory, marketing and the administrative functions of an organization.
Business cases are typically constructed with applied costs. In many cases, applied costs are also used in financial accounting. In such cases, the difference between applied costs and actual costs may be calculated at a later point and treated as a cost variance.
|Definition||An estimate of costs that is used when actual costs are unknown or partially unknown.|
|Value||Making decisions and modeling finances based on the best information available at a point in time.|
|Related Concepts||Management Accounting|
This is the complete list of articles we have written about business costs.
If you enjoyed this page, please consider bookmarking Simplicable.
© 2010-2023 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.
View credits & copyrights or citation information for this page.