The burden sustained in order to perform a certain activity,to carry out a certain production, to achieve certain goals.In a balance sheet, costs raise commercial liabilities to besettled. They should not be confused with money outflows.By contrast, in economics, most formal models ignore thisdistinction between costs and payments.
Cost categoriesActual costs
refer to real transactions, wherease
refer to the alternative taken intoconsideration by decision makers who might want tochoose the line of activity which minimise the costs. Froman external point of view, it is difficult to ascertain whichare the alternative considered.
are not strictly necessary for currentproduction but correspond to strategic goals (e.g.improving the firm's image through anadvertising institutional campaing).
Given a specificproduct version, production costs areusually classified according to their responsiveness todifferent levels of production attained.
are simply not responsive to production levels.If there are only fixed costs, the total costs follow this rule:For instance, the cost of renting an office is a fixed cost,