Theory and Analytics of Costs (B) What is the definition of
costs? What is the relation between average cost and marginal
cost? What is the cost breakeven point? Posted: Jan 2012
Definition of Costs Production of finished goods is consuming
the production factors, which have its own market price. Costs
are defined as financial expression of consumed production
factors. There are two types of costs: Explicit ( accounting )
costs that relates to financial spending for factors consumed
during production. These factors are salaries, rents, material,
energy, ... Implicit ( economic ) costs that are not related to
financial spending, but represent consumption of own resources,
e.g. merchant does not pay the rent, but is running the business
in own premise. Classification of Costs Accounting is
analytically tracking costs, based on cost types. Cost are
divided into following groups: Fixed Costs that do not change
with change with scale of the business. Cost like rent,
depreciation, salaries etc. Do not change with c