Cost

From ArticleWorld


Cost means all the related expenses done or to be done for any particular things. There are various types of cost, such as- (1) Cost of product (2) Cost of capital (3) Cost of project (4) Cost of life


Cost of project is mainly considered at the time of finalizing selling price of the product. In case of manufacturing unit, cost of product includes the items of direct expenses involved in manufacturing the product. Theses direct expenses are directly related to the volume of work done or production made, while the indirect expenses are almost of fixed nature and not related to volume of work done or production done. The direct costs include material consumption, power, direct labour etc., while indirect cost include salary, office and administrative overheads, depreciation, interest etc.

Cost of capital is an expense relating to raising the capital at the beginning. Also during the usage of capital revenue expenses relating to utilizing the capital is also considered for comparing different type of funds to be raised. Public issue expenses are initial cost of capital, while interest is long term revenue expense relating to the capital on each particular fund

Cost of Project is a total cost of new project at the beginning when minimum cost is incurred to start the project. The cost of project includes plant and machinery, land and building, equipments, margin of working capital and preliminary and prospective expenses. The cost of project is met by means of finance which includes capital funds, loan funds, subsidy, etc.

Cost of life is non-financial term. It means value or worth of human body.

Thus cost is mainly used in financial term. Cost is important means to arrive at profit. Also at the time of preparing the budget estimated cost is derived and follow up control measures are set to achieve the goals for making profit.