Chapter- 8 COST

MEANING OF COST OR PRODUCTION COST

Money expenditure incurred by a firm in production of a commodity is called the cost of production.

 

COST FUNCTION

A cost function studies the functional relationship between cost and output

 

SELLING COST

Selling cost refers to the expenditure incurred by the producer in order to promote sale of the commodity

 

REAL COST

Real cost refers to the pain, discomfort and disutility involve in supplying the factors of production by their owner.

 

 EXPLICIT COST

These are those cash payment firm makes to outsider for their goods and services.

For Example: wages are paid to the workers, payment made for raw material and semi manufacture good, interest pay on loan, depreciation allowances.

 

IMPLICIT COST

Implicit costs are cost of self owned and self employed resources.

For example: interest on his own capital, rent on the land owned by him, wages for his own labor.

 

MONEY COST

The amount spent on in terms of money for the production and sale of commodity is called money cost. For example: value of raw material, interest, rent, wages, electricity or motive power charges, depreciation, publicity expenses, insurance, packing transportation cost etc.

 

TYPES OF MONEY COST

  • TOTAL COST: Total cost of production is the sum of all expenditure incurred in producing a given volume of output.

 

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