Realism and Cost Accounting.

Abstract Few economic theorists have much knowledge of cost accounting, while many cost accountants know very little of economic theory. As a result, literature on costs from the economic side only too frequently reflects an ignorance on the part of its writers of the practical difficulties of costing, or else their neglect to take the practical side into account at all. On the other hand, the writing done by many cost accountants is mechanical arid, although by no means useless, has less value than ought to be the case. The economist differentiates between fixed and variable costs and he uses the terms such as marginal cost and average cost, along with marginal revenue and average revenue. According to the economist, the enterpriser does not require a proportionate amount of the cost of his long-lasting equipment to be covered by revenue in any short period. It is recognized that, at times when output is low, revenue may afford little if any contribution toward the cost of such equipment. A shortfall of this kind is expected to be compensated by an excess arising at another period, when revenue is larger and a heavier contribution can be made toward the cost of the equipment.