DEFINITION of 'Applied Cost'

A term used in cost accounting to denote the cost assigned to something, which may be different from the actual cost. Cost accounting, which compares costs of production to output produced, is often part of a company's decision-making for many processes including budgeting and implementing cost controls.

BREAKING DOWN 'Applied Cost'

In manufacturing, for example, the applied cost of a car would include overhead costs such as capital equipment depreciation for the machinery used to make the car. Applied cost analysis could be used to improve manufacturing productivity and/or reduce per-unit costs.

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