Definition: The Social Cost is the cost related to the working of the firm but is not explicitly borne by the firm instead it is the cost to the society due to the production of a commodity. The social cost is used in the social cost-benefit analysis of the overall impact of the operations of the business on the society as a whole and do not normally figure in the business … [Read more...] about Social Cost
Private Cost
Definition: The Private Cost is the cost related to the working of the firm and is used in the cost-benefit analysis of the business decisions. These costs are borne by the firm itself. The private cost is the actual cost incurred in performing the day to day operations of the business, such as the cost involved in the production and consumption of the product. For a firm, … [Read more...] about Private Cost
Replacement Cost
Definition: The Replacement Cost is the cash outlay that firm has to pay in order to replace an old asset at the current market price. Simply, the amount paid to replace the existing property with the new one having the similar utility, without considering the depreciation constitutes the replacement costs. The replacement cost is used while taking the business decisions of … [Read more...] about Replacement Cost
Historical Cost
Definition: The assets and liabilities recorded in the balance sheet with its original acquisition cost, the i.e. amount spent at the time of its acquisition are called as the Historical Cost. In other words, the historical cost is an accounting method in which the assets of the firm are recorded in the books of accounts at the same value at which it was first purchased. The … [Read more...] about Historical Cost
Incremental Cost
Definition: The Incremental Cost refers to the additional cost that a company incurs in undertaking certain actions such as expanding the level of production or adding a new variety of product to the product line, etc. The concept of incremental cost is quite similar to the concept of marginal cost, but with a relatively wider connotation. The marginal cost refers to the … [Read more...] about Incremental Cost
Long-run Cost
Definition: The Long-run Cost is the cost having the long-term implications in the production process, i.e. these are spread over the long range of output. These costs are incurred on the fixed factors, Viz. Plant, building, machinery, etc. but however, the running cost and the depreciation on plant and machinery is a variable cost and hence is included in the short-run … [Read more...] about Long-run Cost
Short-run Cost
Definition: The Short-run Cost is the cost which has short-term implications in the production process, i.e. these are used over a short range of output. These are the cost incurred once and cannot be used again and again, such as payment of wages, cost of raw materials, etc. In a short-run, at least one factor of production is fixed while the other remains variable. … [Read more...] about Short-run Cost
Marginal Cost
Definition: The Marginal Cost refers to the change in the total cost as a result of the production of one more unit of the product. In other words, the marginal cost is the increase or decrease in the total cost due to the production of one additional unit of the product. The marginal cost includes any cost incurred in producing the next unit of the product and hence is … [Read more...] about Marginal Cost
Average Cost
Definition: The Average Cost is the per unit cost of production obtained by dividing the total cost (TC) by the total output (Q). By per unit cost of production, we mean that all the fixed and variable cost is taken into the consideration for calculating the average cost. Thus, it is also called as Per Unit Total Cost. Symbolically, the average cost is expressed as: AC = … [Read more...] about Average Cost
Total Cost
Definition: The Total Cost is the actual cost incurred in the production of a given level of output. In other words, the total expenses (cost) incurred, both explicit and implicit, on the resources to obtain a certain level of output is called the total cost. The total cost includes both the variable cost (that varies with the change in the total output) and the fixed cost … [Read more...] about Total Cost