Economics

Definition: The Variable cost is the cost proportionally related to the level of output, i.e. it increases with the increase in the production and contracts with the decrease in the total output. Simply, the cost which varies with the change in the total output is called the variable cost. The most common form of variable costs is raw material, direct labor related to the … [Read more...] about Variable Cost

Definition: The Fixed Cost is the cost that remains fixed for a certain volume of output. In other words, the cost that does not change with the change in the output or sales revenue, i.e. it remains fixed irrespective of the volume of output is called the fixed cost. The concept of fixed cost is associated with the short run since all the costs vary over time, and no cost … [Read more...] about Fixed Cost

Definition: The Book Cost refers to those expenses which do not involve actual cash payments, but rather the provisions are made in the books of accounts to include them in the profit and loss accounts and avail the tax advantages. In other words, the expenses which are not payable in cash, but rather their provisions are made in the books of accounts while finalizing the … [Read more...] about Book Cost

Definition: The Out-of-Pocket Cost involves the potential future cash payments or cash transfers both recurring and non-recurring, paid during the current accounting period or during the project. In other words, the out-of-pocket cost involves the direct monetary payment for the work done during the project. It is an explicit cost paid in the form of wages, rent, cost of … [Read more...] about Out-of-Pocket Cost

Definition: The Implicit Cost, also called as Imputed Cost is the implied cost that does not take a form of cash outlay, and neither is recorded in the books of accounts. The opportunity cost is the important example of implicit cost wherein the expected returns from the second best alternative action is foregone while pursuing a certain action. The implicit or imputed cost … [Read more...] about Implicit Cost

Definition: The Explicit cost, also called as Actual Cost is the cost actually incurred by the firm for making all the physical payments and the contractual obligations. The physical payments include the cost of material, labor, plant, equipment, building, technology, advertisement, etc. Thus, all the money expenses recorded in the books of accounts are, for practical … [Read more...] about Explicit Cost

Definition: The Full Cost is the total cost incurred in production and is comprised of business cost, opportunity cost, and normal profit. The business cost is the overall cost incurred to carry out the business operations. While the opportunity cost is the returns expected from the second best use of the scarce resources. The normal profit is the minimum earning that the … [Read more...] about Full Cost

Definition: The Business Cost includes all the costs (fixed, variable, direct, indirect) incurred in carrying out the operations of the business. It is similar to the real or actual costs that include all the payments and contractual obligations along with the book cost of depreciation on both the plant and equipment. The firms compute their business cost to determine the … [Read more...] about Business Cost

Definition: The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land, labor, capital, etc. In other words, the opportunity cost is the opportunity lost due to limited resources. Every firm or individual has limited resources, having alternative uses with varied … [Read more...] about Opportunity Cost

Definition: In economics, the Cost Analysis refers to the measure of the cost - output relationship, i.e. the economists are concerned with determining the cost incurred in hiring the inputs and how well these can be re-arranged to increase the productivity (output) of the firm. In other words, the cost analysis is concerned with determining money value of inputs (labor, raw … [Read more...] about Cost Analysis