Cost Analysis: Types of Cost
Meaning and types of cost Cost of production refers to the total monetary expenses incurred on various inputs, employed in the production of the commodity or we can say that it refers to the total money expenses incurred by the firm in the process of transforming inputs into outputs. Types of Costs: The types of costs are as follows: Money cost and Real Cost: Money cost relates to all the expenditures which are made in the terms of money such as cost of raw materials, wages of the labors, payment of rent, Interest on capital, expenses on fuel, power, transportation, and many other production-related costs. It is also called the nominal cost or expenses of production. The real cost is expressed in terms of the efforts, exertions, discomforts, sacrifices, and inconveniences bear by all factor owners in the production of the commodity. Adam Smith regarded pains and sacrifices of labor as a real cost. Marshall called it the social cost. Explicit costs and Implicit costs: Explicit costs are...