Business Costs and Full Costs
Business costs include all the expenses, which are incurred to carry out a business. The concept of business costs is similar to the actual or the real costs. Business costs include all the payments and’ contractual obligations made by the firm together with the book cost of depreciation on plant and equipment. These cost concepts are used for calculating business profits and losses, for filing returns for income tax and for other legal purposes. The concept of full costs, include business costs, opportunity cost and. normal profit. As stated earlier the opportunity cost includes the expected earnings from the second best use of the resources, or the market rate of interest on the total money capital and the value of entrepreneur’s own services, which are not charged form the current business. Normal profit is a necessary minimum earning in addition to the opportunity cost, which a firm must get to remain in its present occupation.
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