(i) Rent of the factory.
(ii) Watchman's wages.
(iii) Permanent worker's salary.
(iv) payments for minimum equipment and machines insurance premium.
(v) Deposit for power.
(vi) License fee etc.

A cost incurred in the past and cannot be recovered anymore in future, once invested it is treated as drowned or disappeared.

It is the payment made for the efforts, pain and sacrifices of all factor owners in production.

The amount of money that a producer receives in exchange for the sale of goods is revenue.

Cost refers to cost of production i.e. the total expenses incurred in the production of a commodity. Cost depends on output, scale of production, prices of factors.

Accounting costs or explicit costs are the payments made by the entrepreneur to the suppliers of various productive factors. The accounting costs are only those costs, which are directly paid out or accounted for by the producer i.e. wages to the labourers employed, prices for the raw materials purchased, fuel and power used, rent for the building hired for the production work, the rate of interest on the borrowed capital and the taxes paid.

(i) In the long run all factors of production become variable.
(ii) The size of the firm can be increased.
(iii) There are no fixed inputs in the long run

LAC = LTC/Q
(iv) It is the locus of points denoting the least cost curve of producing the corresponding output.
(v) The LAC curve is called as 'Plant curve' or Boat shape curve or planning curve or envelope curve.

When AC is falling, MC remains below AC.
When AC becomes constant MC becomes equal to it.
When AC starts increasing MC is above the AC
MC always cuts AC at its minimum point from below.

S.No	Explicit cost	Implicit cost
1	Payment made to others for buying factors of production.	Payment made for the use of firm's own resource.
2	Actual expenditure of the firm in buying or hiring the inputs.	Cost of firm's self owned, self employed resources.
3	(eg) wages, rent, advertisement, depreciation.	Costs are not recorded as no cash payment takes place.
4	Also called accounting cost, out of pocket cost money cost.	Value of the own services are imputed and considered for preparing profit loss accounts. Also called imputed cost.

S.No	Fixed cost	Variable cost
1	It does not change with the level of output	It changes with the level of output.
2	Short period concept	Short period and long period concept.
3	Related to fixed factors	Related to variable factors.
4	Firm continues production even when there is loss of fixed cost.	Firm produces only when variable cost is met.
5	(eg) watchman's wage, building rent.	(eg) wage of workers, power charges.
6	Also called supplementary cost or overhead cost	Also called prime cost, special cost or direct cost.

Total Cost:
Total cost means the sum total of all payments made in the production. It is also called as total cost of production.
TC = TFC + TYC
For example, when the total fixed cost is Rs.1000 and the total variable cost is Rs. 200 then the total cost is Rs.1200 (Rs.1000 + Rs.200)
IF TFC = 12 and
TYC = Q3 -18Q2 + 91Q
TC = 12 + Q3 - 18Q2 + 91Q

Output (in unit)	Total Fixed Cost (TFC) (in Rs)	Total Variable Cost (TVC) (in Rs)	Total Cost  (TC) TFC+TVC (in Rs)
0	1000	0	1000
1	1000	200	1200
2	1000	300	1300
3	1000	400	1400
4	1000	500	1500
5	1000	600	1600

It is to be noted that,
a) The TC curve is obtained by adding TFC + TVC curves vertically.
b) TFC curve remains parallel to x-axis indicating a straight line.
c) TVC starts from the organ and move upwards as no variable cost is incurred at zero output.
d) When TFC + TVC are added, TC starts from TFC and move upwards.
e) TC curve lies above the TVC curve.
f) TVC and TC curves are the same shapes but beginning point is different.

Average fixed cost:
1. It refers to the fixed cost per unit of output.
2. It declines as output increases as fixed cost is constant.
3. It never touches the axis.
4. It is rectangular hyperbola.

Average variable cost:
1. It is the variable cost per unit of output.
2. It initially declines and then increases with the increase of output
3. This is due to law of returns.
4. AVC curve is a 'U' shaped curve.

Average total cost or average cost:
1. It is got by dividing TC by Q or by adding AFC and AVC.
2. It is u shaped.
3. Initially it declines, reaches minimum when the plant is used optimally & rises beyond the optimum output.
4. This is due to the law of variable proportions.

Marginal cost:
1. It is the change in total cost resulting from producing one extra unit of output.
2. First it falls due to more efficient use of variable factors.
3. It increases after the lowest point and it slopes upward.
4. It is 'u' shaped.

Q (in unit)	TFC in (Rs)	TVC in (Rs)	TC in (in Rs)TFC + TVC	ATC (TC/Q)(in Rs)	AFC in(Rs)	AVC in(Rs)	ATC (AFC + AVC)(in Rs)
0	1000	0	1000	α	0	0	0
1	1000	200	1200	1200	1000	200	1200
2	1000	300	1300	650	500	150	650
3	1000	400	1400	466	333	133	466
4	1000	600	1600	400	250	150	400
5	1000	900	1900	380	200	180	380