ABSTRACT

Everybody employed in a factory is an 'economist'. The unskilled operative wishes to produce the highest output from the machine and material with which he is provided in order to obtain the best bonus. The economist has a concept called 'the representative firm' which he uses as a basis for theories. The 'representative firm' is not small and it is not large. If we decide that the cost accountant must cost for the 'representative firm', we also consider what methods he should employ. Job costing, unit costing, multiple costing and the like should not be regarded as different methods since the principles are the same in each case. Economists have devoted considerable thought to the problem of marginal increments of cost. It is true, as the cost accountant says that in a period of depression the business man can reduce his losses by selling at a price just above direct labour, direct material and variable expense, ignoring fixed expense.