Imputed production costs are internal costs borne personally by the entrepreneur. They are directly related to his activities. In fact, we are talking about lost revenue, which would be possible to get with a more reasonable organization of the production process.
Description
Imputed costs reflect the income that the company spends. They are spent on own production. The costs of missed opportunities are formed in the course of choosing the path of development. This is one of the fundamental concepts of modern economic theory.
Features
Imputed costs reflect the values that can be obtained with an alternative action. Moreover, the latter must be abandoned. This phenomenon occurs due to limited resources to satisfy all desires. In an ideal scheme, imputed costs can be zero. This situation is possible with infinite resources. In practice, this is unacceptable. Thus, it turns out that an increase in imputed costs is observed with a decrease in resources. This indicator reflects the value of the best option. It is necessary to refuse it when making an economic choice.
Resource allocation
Imputed costs are characterized by the value of rejected opportunities. We are talking about the quantity of one good, which we have to give up in order to increase the production of another. People in reality always have a choice. And its price is reflected in opportunity costs. This indicator can be expressed in goods, money or hours. Consider how imputed costs arise by example. Suppose a company director has to hire a certain number of management specialists. Each of these people during the day is able to perform only one type of work. The first specialist will bring the company 10, 000 CU, the second - 8, 000, the third - 6, 000. The director hires two employees. In this case, the opportunity cost is CU6, 000.
