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This article is about the economic concept. For the scientific organization, see COST. For uses of "The Cost", see The Cost (disambiguation). "Expenditure" redirects here. For personal consumption expenditure, see Consumption (economics).
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In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this case, money is the input that is gone in order to acquire the thing. This acquisition cost may be the sum of the cost of production as incurred by the original producer, and further costs of transaction as incurred by the acquirer over and above the price paid to the producer. Usually, the price also includes a mark-up for profit over the cost of production. More generalized in the field of economics, cost is a metric that is totaling up as a result of a process or as a differential for the result of a decision.[1] Hence cost is the metric used in the standard modeling paradigm applied to economic processes. Costs (pl.) are often further described based on their timing or their applicability.
Contents
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1 Types of accounting costs 2 Comparing private, external, and social costs 3 Cost estimation 4 Manufacturing Costs vs. Non-manufacturing Costs 5 Other costs 6 See also 7 References 8 Further reading
polluted waters or polluted air also created as part of the process of producing the car is an external cost borne by those who are affected by the pollution or who value unpolluted air or water. Because the manufacturer does not pay for this external cost (the cost of emitting undesirable waste into the commons), and does not include this cost in the price of the car (a Kaldor-Hicks compensation), they are said to be external to the market pricing mechanism. The air pollution from driving the car is also an externality produced by the car user in the process of using his good. The driver does not compensate for the environmental damage caused by using the car.
Cost estimation[edit]
Main articles: Cost estimation, Cost overrun, and parametric estimating When developing a business plan for a new or existing company, product, or project, planners typically make cost estimates in order to assess whether revenues/benefits will cover costs (see cost-benefit analysis). This is done in both business and government. Costs are often underestimated, resulting in cost overrun during execution. Cost-plus pricing, is where the price equals cost plus a percentage of overhead or profit margin.
Non-manufacturing Costs are those costs that are not directly incurred in manufacturing a product. Examples of such costs are salary of sales personnel and advertising expenses. Generally non-manufacturing costs are further classified into two categories: 1. 2. Selling and distribution Costs. Administrative Costs.
Other costs[edit]
A defensive cost is an environmental expenditure to eliminate or prevent environmental damage. Defensive costs form part of the genuine progress indicator (GPI) calculations.
Labour on=costs would include travel time, holiday pay, training costs, working clothes, social insurance, taxes on employment &c. Path cost is a term in networking to define the worthiness of a path, see Routing.
See also[edit]
Average cost Cost accounting Cost curve Expense Externality Fixed costs Incremental costs Life cycle costs Outline of industrial organization Price Repugnancy costs Semi variable costs Total cost Variable costs
References[edit]
1. Jump up^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 16. ISBN 0-13-063085-3.
Further reading[edit]
William Baumol (1968), Entrepreneurship in Economic Theory. American Economic Review, Papers and Proceedings.
Stephen Ison and Stuart Wall (2007), Economics, 4th Edition, Harlow, England; New York: FT Prentice Hall.
Israel Kirzner (1979), Perception, Opportunity and Profit, Chicago: University of Chicago Press.
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