# Cost > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Cost > Markdown URL: https://mediated.wiki/source/Cost.md > Source: https://en.wikipedia.org/wiki/Cost > Source revision: 1325716494 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) Money spent to produce or procure goods or services For other uses, see [Cost (disambiguation)](/source/Cost_(disambiguation)). "Expensive" redirects here. For the song by Ty Dolla Sign featuring Nicki Minaj, see [Expensive (song)](/source/Expensive_(song)). Part of a series on Accounting Constant purchasing power Historical cost Management Tax Major types Audit Budget Cost Forensic Financial Fund Governmental Management Social Tax Key concepts Accounting period Accrual Constant purchasing power Economic entity Fair value Going concern Historical cost Matching principle Materiality Revenue recognition Unit of account Selected accounts Assets Cash Cost of goods sold Depreciation / Amortization (accounting) Equity Expenses Goodwill Liabilities Profit Revenue Accounting standards Generally-accepted principles Generally-accepted auditing standards Convergence International Financial Reporting Standards International Standards on Auditing Management Accounting Principles Financial statements Annual report Balance sheet Cash-flow Equity Income Management discussion Financial statement analysis Bookkeeping Bank reconciliation Debits and credits Double-entry system FIFO and LIFO Journal Ledger / General ledger Trial balance Auditing Financial Internal Firms Report Sarbanes–Oxley Act People and organizations Accountants Accounting organizations Luca Pacioli Development History Research Positive accounting Sarbanes–Oxley Act Misconduct Creative Earnings management Error account Hollywood Off-balance-sheet Two sets of books v t e **Cost** is the value of [money](/source/Money) that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this case, money is the input that is gone in order to acquire the thing. This acquisition cost may be the sum of the cost of production as incurred by the original producer, and further costs of transaction as incurred by the acquirer over and above the [price](/source/Price) paid to the producer. Usually, the price also includes a mark-up for profit over the cost of production. More generalized in the field of [economics](/source/Economics), cost is a [metric](/source/Performance_metric) that is totaling up as a result of a process or as a differential for the result of a [decision](/source/Decision_making).[1] Hence cost is the metric used in the standard [modeling](/source/Business_process_modelling) [paradigm](/source/Paradigm) applied to economic [processes](/source/Business_process). Costs (pl.) are often further described based on their timing or their applicability. ## Types of accounting costs Main articles: [accounting cost](/source/Accounting_cost), [opportunity cost](/source/Opportunity_cost), [historical cost](/source/Historical_cost), [marginal cost](/source/Marginal_cost), [sunk cost](/source/Sunk_cost), and [standard cost accounting](/source/Standard_cost_accounting) In accounting, costs are the monetary value of expenditures for supplies, services, labor, products, equipment and other items purchased for use by a business or other accounting entity.[2] It is the amount denoted on [invoices](/source/Invoice) as the [price](/source/Price) and recorded in [book keeping](/source/Book_keeping) records as an [expense](/source/Expense) or asset [cost basis](/source/Cost_basis). [Opportunity cost](/source/Opportunity_cost), also referred to as *[economic cost](/source/Economic_cost)* is the value of the best alternative that was not chosen in order to pursue the current endeavor that is., what could have been accomplished with the resources expended in the undertaking. It represents opportunities forgone.[3] In theoretical economics, **cost** used without qualification often means opportunity cost.[4] ## Comparing private, external, and social costs Main articles: [Externality](/source/Externality) and [social cost](/source/Social_cost) When a transaction takes place, it typically involves both private costs and external costs. **Private costs** are the costs that the buyer of a good or service pays the seller.[5] This can also be described as the costs internal to the firm's [production function](/source/Production_function). [External costs](/source/Externality) (also called externalities), in contrast, are the costs that people other than the buyer are forced to pay as a result of the transaction. The bearers of such costs can be either particular individuals or society at large.[6] Note that external costs are often both non-monetary and problematic to quantify for comparison with monetary values. They include things like pollution, things that society will likely have to pay for in some way or at some time in the future, even so that are not included in transaction prices. [Social costs](/source/Social_cost) are the sum of private costs and external costs.[7] For example, the manufacturing cost of a car (i.e., the costs of buying inputs, land tax rates for the car plant, [overhead costs](/source/Overhead_(business)) of running the plant and labor costs) reflects the *private cost* for the manufacturer (in some ways, normal profit can also be seen as a cost of production; see, e.g., Ison and Wall, 2007, p. 181). The polluted waters or polluted air also created as part of the process of producing the car is an *external cost* borne by those who are affected by the pollution or who value unpolluted air or water. Because the manufacturer does not pay for this external cost (the cost of emitting undesirable waste into the commons), and does not include this cost in the price of the car (a [Kaldor–Hicks compensation](/source/Kaldor%E2%80%93Hicks_efficiency)), they are said to be external to the market pricing mechanism. The air pollution from driving the car is also an externality produced by the car user in the process of using his good. The driver does not compensate for the [environmental damage](/source/Environmental_degradation) caused by using the car. ## Cost estimation Main articles: [Cost estimation](/source/Cost_estimation), [Cost overrun](/source/Cost_overrun), and [parametric estimating](/source/Parametric_estimating) When developing a [business plan](/source/Business_plan) for a new or existing company, product or project, planners typically make cost estimates in order to assess whether [revenues](/source/Revenue)/benefits will cover costs (see [cost–benefit analysis](/source/Cost%E2%80%93benefit_analysis)). Costs are often underestimated, resulting in [cost overruns](/source/Cost_overrun) during execution. *Cost-plus pricing* is where the price equals cost plus a percentage of overhead or profit margin. In [business economics](/source/Business_economics), the profitability of a trade or sales prospect relies on the ability of an enterprise to sustain [market prices](/source/Price#Market_price) that cover all costs and leave a [surplus](/source/Economic_surplus#Producer_surplus) for owner interest, as expressed by: Profit = Revenues – Costs . {\displaystyle {\text{Profit = Revenues – Costs}}.} [a] ## Manufacturing costs vs. non-manufacturing costs **[Manufacturing costs](/source/Manufacturing_cost)** are those costs that are directly involved in [manufacturing](/source/Manufacturing) of products.[9] Examples of manufacturing costs include [raw materials](/source/Raw_materials) costs and charges related to workers. Manufacturing cost is divided into three broad categories:[10] 1. [Direct materials cost](/source/Direct_materials_cost) 1. [Direct labor cost](/source/Direct_labor_cost) 1. [Manufacturing overhead cost](/source/Manufacturing_overhead_cost) Non-manufacturing costs are those costs that are not directly incurred in manufacturing a [product](/source/Product_(business)).[11] Examples of such costs are salary of sales [personnel](/source/Personnel) and [advertising](/source/Advertising) expenses. Generally, non-manufacturing costs are further classified into two categories:[12] 1. Selling and distribution costs 1. [Administrative](/source/Administration_of_business) costs ## Other costs This section needs more citations. Please help improve this article by adding citations to reliable sources in this section. Unsourced material may be challenged and removed. Find sources: "Cost" – news · newspapers · books · scholar · JSTOR (June 2023) (Learn how and when to remove this message) A **defensive cost** is an environmental expenditure to eliminate or prevent environmental damage. Defensive costs form part of the [genuine progress indicator (GPI)](/source/Genuine_progress_indicator) calculations. Labour **costs** would include travel time, holiday pay, training costs, working clothes, social insurance, taxes on employment &c. **Path cost** is a term in networking to define the worthiness of a path, see [Routing](/source/Routing). Non-monetary costs can be related to [intrinsic motivation](/source/Motivation#Intrinsic_and_extrinsic).[13] ## See also - [Average cost](/source/Average_cost) - [Cost accounting](/source/Cost_accounting) - [Cost curve](/source/Cost_curve) - [Cost object](/source/Cost_object) - [Direct cost](/source/Direct_cost) - [Fixed cost](/source/Fixed_cost) - [Incremental cost](/source/Incremental_cost) - [Indirect cost](/source/Indirect_cost) - [Life-cycle cost](/source/Whole-life_cost) - [Non-monetary economy](/source/Non-monetary_economy) - [Outline of industrial organization](/source/Outline_of_industrial_organization) - [Repugnancy costs](/source/Repugnancy_costs) - [Semi-variable cost](/source/Semi-variable_cost) - [Total cost](/source/Total_cost) - [Variable cost](/source/Variable_cost) ## Notes 1. **[^](#cite_ref-9)** [Gross profit](/source/Gross_income) is revenue minus the [cost of goods sold](/source/Cost_of_goods_sold).[8] ## References 1. **[^](#cite_ref-1)** [O'Sullivan, Arthur](/source/Arthur_O'Sullivan_(economist)); Sheffrin, Steven M. (2003). [*Economics: Principles in Action*](https://archive.org/details/economicsprincip00osul). Upper Saddle River, New Jersey: Pearson Prentice Hall. p. [16](https://archive.org/details/economicsprincip00osul/page/n32). [ISBN](/source/ISBN_(identifier)) [0-13-063085-3](https://en.wikipedia.org/wiki/Special:BookSources/0-13-063085-3). 1. **[^](#cite_ref-2)** Reviso. ["What is cost?"](https://www.reviso.com/cost/). 1. **[^](#cite_ref-3)** ["Opportunity Cost: Definition, Calculation Formula, and Examples"](https://www.investopedia.com/terms/o/opportunitycost.asp). *Investopedia*. Retrieved 2024-01-30. 1. **[^](#cite_ref-4)** ["CCP Exam Dumps"](https://web.archive.org/web/20200929063937/https://dumpsbook.com/Exam/CCP). Archived from [the original](https://www.dumpsbook.com/Exam/CCP) on 29 September 2020. Retrieved 1 March 2018. 1. **[^](#cite_ref-5)** ["Private cost - Energy Education"](https://energyeducation.ca/encyclopedia/Private_cost#:~:text=The%20private%20cost%20is%20any,a%20result%20of%20the%20production.). *energyeducation.ca*. Retrieved 2024-01-30. 1. **[^](#cite_ref-6)** ["External Cost"](https://www.tutor2u.net/economics/topics/external-cost). *www.tutor2u.net*. Retrieved 2024-01-30. 1. **[^](#cite_ref-7)** ["Social Cost"](https://www.economicshelp.org/blog/glossary/social-cost/). *Economics Help*. Retrieved 2024-01-30. 1. **[^](#cite_ref-8)** ["Revenue vs. Profit: What's the Difference?"](https://www.investopedia.com/ask/answers/122214/what-difference-between-revenue-and-profit.asp). Investopedia. 1. **[^](#cite_ref-10)** ["Production Costs vs. Manufacturing Costs: What's the Difference?"](https://www.investopedia.com/ask/answers/042715/whats-difference-between-production-cost-and-manufacturing-cost.asp). *Investopedia*. Retrieved 2024-01-30. 1. **[^](#cite_ref-11)** ["Total manufacturing cost: What is it and how to calculate it"](https://www.oneadvanced.com/news-and-opinion/total-manufacturing-cost-what-is-it-and-how-to-calculate-it/). *Advanced*. Retrieved 2024-01-30. 1. **[^](#cite_ref-12)** ["2.3: Cost Terminology"](https://biz.libretexts.org/Courses/Folsom_Lake_College/ACCT_311%3A_Managerial_Accounting_(Black)/02%3A_Types_of_Costs/2.03%3A_Cost_Terminology). *Business LibreTexts*. 2021-02-27. Retrieved 2024-01-30. 1. **[^](#cite_ref-13)** Bragg, Steven (2023-10-08). ["Nonmanufacturing overhead costs definition"](https://www.accountingtools.com/articles/nonmanufacturing-overhead-costs-definition). *AccountingTools*. Retrieved 2024-01-30. 1. **[^](#cite_ref-v489_14-0)** Sorauren, Ignacio Falgueras (2000). ["Non-Monetary Incentives: Do People Work Only for Money?"](http://www.jstor.org/stable/3857840). *Business Ethics Quarterly*. **10** (4). Cambridge University Press: 925–944. [doi](/source/Doi_(identifier)):[10.2307/3857840](https://doi.org/10.2307%2F3857840). [ISSN](/source/ISSN_(identifier)) [1052-150X](https://search.worldcat.org/issn/1052-150X). [JSTOR](/source/JSTOR_(identifier)) [3857840](https://www.jstor.org/stable/3857840). Retrieved 9 July 2025. ## External links - Media related to [Costs](https://commons.wikimedia.org/wiki/Category:Costs) at Wikimedia Commons - The dictionary definition of [*cost*](https://en.wiktionary.org/wiki/cost) at Wiktionary - The dictionary definition of [*time-consuming*](https://en.wiktionary.org/wiki/time-consuming) at Wiktionary v t e Microeconomics Supply and demand Demand/Law of demand Supply/Law of supply Elasticity Cross elasticity of demand Income elasticity of demand Price elasticity of demand Price elasticity of supply Equilibrium General Externality Income–consumption curve Indifference curve Price Price controls Price ceiling Price floor Price discrimination Price signal Price system/Free Pricing Scarcity Shortage/Excess supply Substitution effect Surplus Threshold population Markets and Firms Exchange Economies of scale Diseconomies of scale Economies of scope Returns to scale Goods and services Goods Service Household Market failure Market structure Competition Monopolistic Perfect Duopoly Monopoly Bilateral Complementary Monopsony Oligopoly Oligopsony Production Profit Decision theory and behavioral economics Budget set Consumer choice Cost Average Marginal Opportunity Implicit Social Sunk Transaction Cost–benefit analysis Information Intertemporal choice Preferences Rent Risk aversion Utility Expected Marginal Welfare economics Deadweight loss Distribution Pareto efficiency Public goods Rationing Social choice Wage Econometrics and mathematical economics Aggregation Convexity and non-convexity Uncertainty Other subfields Business Computational Development Engineering economics Civil engineering economics Evolutionary Experimental Game theory Green Industrial organization Institutional Labour Law and economics Managerial Mathematical Microfoundations Operations research Optimization See also Economics Applied Macroeconomics Political economy Business portal Category Authority control databases International GND National Czech Republic Latvia Israel Other Yale LUX --- Adapted from the Wikipedia article [Cost](https://en.wikipedia.org/wiki/Cost) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Cost?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.