cost

(noun)

A negative consequence or loss that occurs or is required to occur.

Related Terms

Examples of cost in the following topics:

  • Average and Marginal Cost

    • Marginal cost is the change in total cost when another unit is produced; average cost is the total cost divided by the number of goods produced.
    • Marginal cost is not related to fixed costs.
    • When the average cost declines, the marginal cost is less than the average cost.
    • When the average cost increases, the marginal cost is greater than the average cost.
    • This graph is a cost curve that shows the average total cost, marginal cost, and marginal revenue.

  • Types of Costs

    • In economics, the total cost (TC) is the total economic cost of production.
    • It consists of variable costs and fixed costs.
    • Total cost is the total opportunity cost of each factor of production as part of its fixed or variable costs .
    • Variable costs are also the sum of marginal costs over all of the units produced (referred to as normal costs).
    • Economic cost is the sum of all the variable and fixed costs (also called accounting cost) plus opportunity costs.

  • Economic Costs

    • An example of economic cost would be the cost of attending college.
    • So, the economic cost of college is the accounting cost plus the opportunity cost.
    • So, the economic cost of college is the accounting cost plus the opportunity cost.
    • Total cost (TC): total cost equals total fixed cost plus total variable costs (TC = TFC + TVC) .
    • Variable cost (VC): the cost paid to the variable input.

  • Cost-Based Pricing

    • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
    • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
    • Price = (1+ Percent Markup)(Unit Variable Cost + Average FixedCost) .
    • A company must know its costs.
    • Cost-based pricing is misplaced in industries where there are high fixed costs and near-zero marginal costs.

  • The Cost of New Common Stock

    • The cost of new common stock is determined by adding flotation costs to the cost of current equity.
    • The cost of new equity is 15.3%.
    • The cost of external equity is higher than the cost of existing equity, or retained earnings.
    • Flotation costs include all costs of issuing the securities, such as banker's fees, legal fees, underwriting fees, filing costs, etc.
    • Flotation cost of 3%.

  • Cost of capital

    • The cost of capital refers to the cost of the money used to pay for the capital.
    • In order to determine a company's cost of capital, the cost of debt and the cost of equity must be calculated.
    • This determines the "market" cost of equity.
    • One way of combining the cost of debt and equity to generate a single cost of capital number is through the weighted-average cost of capital (WACC).
    • The cost of capital is the cost of the money used to finance the plant.

  • The Supply Curve in Perfect Competition

    • The total revenue-total cost perspective and the marginal revenue-marginal cost perspective are used to find profit maximizing quantities.
    • In economics, a cost curve is a graph that shows the costs of production as a function of total quantity produced.
    • In a free market economy, firms use cost curves to find the optimal point of production (minimizing cost).
    • There are two ways in which cost curves can be used to find profit maximizing quantities: the total revenue-total cost perspective and the marginal revenue-marginal cost perspective.
    • The total revenue-total cost perspective recognizes that profit is equal to the total revenue (TR) minus the total cost (TC).

  • Information Costs and Bond Prices

    • Information costs influence the bond prices and interest rates.
    • We include these costs in the bond's market price and interest rate, and they raise the cost of borrowing.
    • Investors pay a greater cost to acquire information for the high information cost bonds.
    • Thus, investors are attracted to the low-information cost bonds, boosting their demand for low information cost bonds, increasing the market price and decreasing market interest rate.
    • Therefore, low-information-cost bonds pay a lower interest rate.

  • Average Cost Method

    • Under the Average Cost Method, It is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period.
    • There are two commonly used average cost methods: Simple Weighted Average Cost method and Moving-Average Cost method.
    • Moving-Average (Unit) Cost is a method of calculating Ending Inventory cost.
    • Each time, purchase costs are added to Beginning Inventory Cost to get Cost of Current Inventory.
    • The Weighted-Average Method of inventory costing is a means of costing ending inventory using a weighted-average unit cost.

  • Sunk Costs

    • Sunk costs are retrospective costs that cannot be recovered, and are therefore irrelevant to future investment decisions in the project which incurs them.
    • Sunk costs are retrospective costs that have already been incurred and cannot be recovered.
    • Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken .
    • The sunk cost is distinct from economic loss.
    • The sunk cost may be used to refer to the original cost or the expected economic loss.