Social cost,Opportunity cost,Sunk cost,Floating cost,Prime cost,Fixed cost, Variable cost

Economics

Social Cost:
It refers to the total cost borne by the society due to the production of a commodity.Alfred Marshall defined the term social cost to represent the efforts and sacrifices
undergone by the various members of
the society in producing a commodity.
Social Cost is the cost that is not borne
by the firm, but incurred by others in the society. For example, large business firms cause air pollution, water pollution and other damages in a particular area which involve cost to the society. These costs are treated as social cost. It is also called as External Cost.

Opportunity Cost:
It refers to the cost of next best alternative use. In other words, it is the value of the next best alternative foregone. For example,a farmer can cultivate both paddy and sugarcane in a farm land. If he cultivates paddy, the opportunity cost of paddy output is the amount of sugarcane output given up. Opportunity Cost is also called
as ‘Alternative Cost’ or ‘Transfer Cost’.

Sunk Cost:
A cost incurred in the past and cannot be recovered in future is called as Sunk Cost. This is historical but irrelevant for future business decisions. It is called as sunk because, they are unalterable,unrecoverable, and if once invested it should be treated as drowned or disappeared. For example, if a firm purchases a specialized equipment designed for a special plant, the expenditure on this equipment is a sunk cost, because it has no alternative use and its opportunity Cost is zero. Sunk cost is
also called as ‘Retrospective Cost’.

Floating Cost:
It refers to all expenses that are directly associated with business activities but not with asset creation. It does not include the purchase of raw material as it is part of current assets. It includes payments like wages to workers, transportation charges,fee for power and administration. Floating cost is necessary to run the day-to-day
business of a firm.

Prime Cost:
All costs that vary with output, together with the cost of administration are known as Prime Cost. In short, Prime cost = Variable costs + Costs of Administration.

Fixed Cost:
Fixed Cost does not change with the change in the quantity of output. In other words, expenses on fixed factors remain unchanged irrespective of the level of output, whether the output is increased
or decreased or even it becomes zero. For example, rent of the factory, watchman’s wages, permanent worker’s salary,payments for minimum equipments and machines insurance premium, deposit
for power, license fee, etc fixed cost is
also called as ‘Supplementary Cost’ or
‘Overhead Cost’.

Variable Cost:
These costs vary with the level of output.Examples of variable costs are: wages of temporary workers, cost of raw materials,fuel cost, electricity charges, etc. Variable cost is also called as Prime Cost, Special Cost, or Direct Cost.

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