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Lies, Damned Lies, and Cost Accounting by Reginald Tomas Lee

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CHAPTER 6

Cost Definitions

Cost is an interesting term. It is something that is extremely common to discuss in many settings, business or not. We talk about the cost to make a product, the cost to have a meeting, the cost to process an invoice, or to acquire a new customer. My wife and I even discuss and debate costs related to cooking meals! I would offer, however, that the business world does not understand costs to the extent it believes it does. Also, I would offer we cannot regularly and easily discern the two types of costs and why some costs have absolutely nothing to do with cash. Let me demonstrate.

Let’s say I have a pen I’d like to sell to you. We agree on a price of $50. I sell the pen to you, you give me $50. There is a transaction ...

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