Cost

Cost is the amount paid or charged for something, either goods or services.

Types of Cost

a) Real Cost: It is the actual cost paid in order to own a particular good or service.

b) Opportunity Cost: The cost of a foregone opportunity is known as opportunity cost. According to Leftwitch, the opportunity cost of the particular products is the value of the foregone alternative products that resources used in its production could have produced: If resources were not used in that firm in the production process, these resources would have an alternative use. For example; let us suppose that a steel manufacturing company provides steel for building bridges. In this case, the opportunity cost is the cost of manufacturing steel that would be used for building houses.

c) Money cost: Money outlays of a firm on the process of production of its outputs. The cost which enters the records of the accounts of the company.

d) Explicit cost: (or called direct or cash cost) It is incurred when money is spent to hire labour, repair machinery, buy seed, fuel, or other things for which cash expenditures are made. These expenditures have been made to enhance production output but a simple totaling of all such money spent is inadequate when trying to determine the cost of production since these costs are 1/3rd or 2/3rd of all costs.

e) Implicit cost (Indirect or noncash cost): are incurred in using any resources for which there was no cash outlay during the period that the resource was being used, and it is necessary to determine that type of resource cost.