Define: Cost

Business, Legal & Accounting Glossary

Definition: Cost


Quick Summary of Cost


Cost is referred to as the value of money that has the power to produce any commodity or service. Cost is exhaustible in nature; once cost is given up for any good or service, it cannot be used anymore. Cost can be explained as a certain amount of money, which is used as an input and is exhausted in order to acquire any good or service.



What is the dictionary definition of Cost?

Dictionary Definition


  • Amount of money, time, etc. that is required or used.
  • A negative consequence or loss that occurs or is required to occur.
  • Manner; way; means; available course; contrivance.

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Full Definition of Cost


Different Types Of Costs

Cost is a key concept in economics. Cost can be differentiated into several types. The significance of cost lies in the fact that it is incurred while performing several economic activities like production. Major types of costs can be summarized as:

  • Actual cost: this type of cost refers to the cost incurred due to real transactions.
  • Discretionary cost: this type of cost is not used for increasing current production, but is used for publicity of the firm by advertisements.
  • Fixed cost: this cost remains fixed at all stages of production. The best example of this type of cost can be the cost of renting an office.

Total cost: this is the sum of all type of costs that are incurred in a production process

Average cost: when the total cost incurred in the production of any good is divided by the number of goods produced, the average cost is obtained.

A simple equation explains the identities of the above costs:

TC = F + VC×q

Where, TC = total cost, F = fixed cost, VC = variable costs, q = quantity

Again, AC = TC/q = F/q + VC

Where, AC = average cost, TC = total cost, F = fixed costs, VC = variable costs, q = quantity


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Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/cost/
Modern Language Association (MLA):
Cost. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. April 06, 2020 https://payrollheaven.com/define/cost/.
Chicago Manual of Style (CMS):
Cost. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/cost/ (accessed: April 06, 2020).
American Psychological Association (APA):
Cost. PayrollHeaven.com. Retrieved April 06, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/cost/

Definition Sources


Definitions for Cost are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th March, 2020