From the course: Accounting Foundations: Cost Estimating
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Cost vs. cost estimates
From the course: Accounting Foundations: Cost Estimating
Cost vs. cost estimates
- For most people, the purchase price is the cost, that is, they think the number on the price tag is all they pay to get that product or service. But I'm sure you know what I'm going to say, that's wrong, well, sort of. If you buy a head of lettuce there's probably no other costs really associated with using that lettuce, same with other small items, but when you make a major purchase, things quickly change. I bought my first car at 17 only looking at the list price. But my dad asked if I considered all of the costs like maintenance, insurance, fuel costs, and a contingency as something went wrong. I quickly realized the price which was the initial cost of the car was not my final cost. I failed to calculate the lifecycle cost or the total cost of ownership over time. It's understandable, people, even financial professionals misunderstand the term cost and how to estimate it. So let's clarify. We need to take our…
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