## Long-run Cost

Definition: The Long-run Cost is the cost having the long-term implications in the production process, i.e. these are spread over the long range of output. These costs are incurred on the fixed factors, Viz. Plant, building, machinery, etc. but however, the running cost and the depreciation on plant and machinery is a variable cost and…

## Short-run Cost

Definition: The Short-run Cost is the cost which has short-term implications in the production process, i.e. these are used over a short range of output. These are the cost incurred once and cannot be used again and again, such as payment of wages, cost of raw materials, etc. In a short-run, at least one factor…

## Marginal Cost

Definition: The Marginal Cost refers to the change in the total cost as a result of the production of one more unit of the product. In other words, the marginal cost is the increase or decrease in the total cost due to the production of one additional unit of the product. The marginal cost includes…

## Average Cost

Definition: The Average Cost is the per unit cost of production obtained by dividing the total cost (TC) by the total output (Q). By per unit cost of production, we mean that all the fixed and variable cost is taken into the consideration for calculating the average cost. Thus, it is also called as Per…

## Total Cost

Definition: The Total Cost is the actual cost incurred in the production of a given level of output. In other words, the total expenses (cost) incurred, both explicit and implicit, on the resources to obtain a certain level of output is called the total cost. The total cost includes both the variable cost (that varies…

## Variable Cost

Definition: The Variable cost is the cost proportionally related to the level of output, i.e. it increases with the increase in the production and contracts with the decrease in the total output. Simply, the cost which varies with the change in the total output is called the variable cost. The most common form of variable…

## Fixed Cost

Definition: The Fixed Cost is the cost that remains fixed for a certain volume of output. In other words, the cost that does not change with the change in the output or sales revenue, i.e. it remains fixed irrespective of the volume of output is called the fixed cost. The concept of fixed cost is…

## Book Cost

Definition: The Book Cost refers to those expenses which do not involve actual cash payments, but rather the provisions are made in the books of accounts to include them in the profit and loss accounts and avail the tax advantages. In other words, the expenses which are not payable in cash, but rather their provisions…

## Out-of-Pocket Cost

Definition: The Out-of-Pocket Cost involves the potential future cash payments or cash transfers both recurring and non-recurring, paid during the current accounting period or during the project. In other words, the out-of-pocket cost involves the direct monetary payment for the work done during the project. It is an explicit cost paid in the form of…

## Implicit Cost

Definition: The Implicit Cost, also called as Imputed Cost is the implied cost that does not take a form of cash outlay, and neither is recorded in the books of accounts. The opportunity cost is the important example of implicit cost wherein the expected returns from the second best alternative action is foregone while pursuing a…

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