Business, Legal & Accounting Glossary
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.
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:
Total cost: this is the sum of all type of costs that are incurred in a production process
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
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This glossary post was last updated: 26th March, 2020