A well-defined classification of costs is certainly essential to mention the costs of cost centers. The process of grouping costs is based on similarities or common characteristics. The concept of cost can be effortlessly comprehended by classifying the costs. For example, by being married to a person, one could lose the opportunity to marry some other person or by investing more capital in video games, one might lose the opportunity in watching movies.
The idea behind the concept of opportunity cost is that the cost of one item is the lost opportunity to do something else. Hence there are several different types of concepts of cost, which have been discussed in the following.
Besides the concept of opportunity cost, there are several other concepts of cost namely fixed costs, explicit costs, social costs, implicit costs, social costs, and replacement costs. The company's decision to maximize earnings relies on the behavior of its costs and revenues. With heightened competition in today's world, companies are urged to make maximum profits. From an economist's point of view, the cost of manufacturing any goods and services is often said to be the concept of opportunity cost. In a simpler way, the concept of cost is a financial valuation of resources, materials, risks, time and utilities consumed to purchase goods and services. It refers to the amount of payment made to acquire any goods and services. The concept of cost is a key concept in Economics. The concept of cost gives an indication of the overall resource required to avail the same.Ĭost is thus another vital concept in the study of business, so, without further ado let us start digging into its concept. Thus, the cost is nothing but a payment of value that is given in order to utilize the service or goods.
So, what does it mean? It means putting value on something. ‘You are required to put a cost on it!’ This is a common phrase that is used as a general dialect now and then. Indication of a Value – The Concept of Cost
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