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dear sir,
I have the doubts about the meaning of the following costs:
i) Conversion costs (possibly in throughput accounting)
ii) Notional costs (in RI and Relevant costs)
iii) imputed costs
iv)avoidable coststhank you
Conversion costs are the costs of converting the raw materials into finished goods, so they are the total of labour and overheads.
Notional and imputed costs mean the same thing. They are ‘pretend’ costs and the only please you are really likely to see the words are in calculations of residual income, where we have a notional interest cost (which is not actually invoiced, but is there simply to calculate the performance measure).
Avoidable costs are costs that will not be there (i.e. avoided) if a particular product is stopped being produced, or if a division is closed down. It usually refers to fixed costs – total fixed costs will remain unchanged if they stop a product or close a division, unless some of them are avoidable.
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