What are costs? Definition and meaning
In the business sense, costs are a monetary unit. This indicates the consumption of production factors that are required for the creation of operational outputs, such as goods and services.
In the macroeconomic sense, the term costs covers, in addition to material goods, also intangible values. Different types of costs, such as personnel costs or material costs, cannot always be assigned to a cost object. They are therefore also distinguished between directly attributable individual costs and indirectly attributable overhead costs.
Depending on the level of capacity utilisation, costs are also distinguished into fixed and variable costs. While fixed costs are constant, variable costs depend on the level of capacity utilisation.
Costs vs tasting and prices: which one is meant
In everyday language, the verb “to cost” also relates to asking about a price (“What does that cost?”), and in German the related word can even mean tasting food. In the business sense, by contrast, costs denote the consumption of production factors expressed in monetary terms. That is the meaning this article refers to.