11.

CASH COST
- Cash cost is a cash basis
accounting cost
recognition process that
classifies costs as they are
paid for in cash, and is
recognized in the general
ledger at the point of sale.
This method is contrary to
the
accrual cost recognition
method, which directly
influences the
operating cash flow figure.
Ex.
If people believe that coffee will sell for $40 a pound in three months, the price of a futures
contract for delivery of coffee in three months cannot be $100; it will be more like $40,
though the price for storing the coffee helps determine the relationships between futures
prices and cash prices. In any case, futures prices for a given commodity generally
converge toward the cash price as the delivery month of the futures contract approaches
12. BOOK COST
- Book value of an asset is the value at which
the asset is carried on a balance sheet and
calculated by taking the cost of an asset minus
the accumulated depreciation. Book value is
also the net asset value of a company,
calculated as total assets minus intangible
assets (patents, goodwill) and liabilities.
Ex.
Value investors search for companies trading for prices at or below book value (indicating
a price-to-book ratio of less than 1.0), which implies the shares are selling for less than
the company's actual worth.
13. LIFE-CYCLE COST
-Life-cycle costing refers to the concept of designing products, goods, and services with
a full and explicit recognition of the associated costs over the various phases of their life
cycles. Two key concepts in life-cycle costing are that the later design changes are made,
the higher the costs, and that decisions made early in the life cycle tend to "lock in" costs
that are incurred later. Figure 2-4 illustrates how costs are committed early in the product
life cycle-nearly 70-90% of all costs are set during the design phases. At the same time,
as the figure shows, only 10-30% of cumulative life-cycle costs have been spent.
EX. Life-Cycle Costing goes beyond the development of the project. It compels you to
consider the larger picture first and accordingly make decisions.
Software Development:
Suppose you are planning to
deploy a Learning
Management System (LMS).
To get to the Life-Cycle Costs
associated with this decision,
you would end-up seeking
answers to questions like:
 What are the costs of
developing the system
ourselves versus
purchasing one?
 What are the costs of hosting the LMS in internal severs versus a vendor server
site?
 How much do we need to operate the new software? Do we need additional staff?
 What are the associated training costs?
 If we host it internally, can our existing application support group maintain it? If no,
should we outsource the maintenance?
14. REVENUE

-Revenue is the amount of money that a company actually receives during a specific
period, including discounts and deductions for returned merchandise. It is the "top line"
or "gross income" figure from which costs are subtracted to determine net income.
-Revenue is calculated by multiplying the price at which goods or services are sold by the
number of units or amount sold.

Ex.

Let's assume grocery store XYZ sold $100,000

worth of food for the year. It would record
these sales as revenue on the very top of
its income statement (as shown below).
http://www.investopedia.com/terms/r/revenue.asp#ixzz4xklyPZ5Z
http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/book-
value-1080
http://www.investinganswers.com/financial-dictionary/options-derivatives/cash-price-
5255
http://engineeringandeconomicanalysis.blogspot.com/2012/09/life-cycle-costs.html
http://www.investopedia.com/terms/c/cashcost.asp
http://www.brighthubpm.com/project-planning/54911-what-is-life-cycle-costing/