Absolute cost

Definition: Absolute cost refers to the total contribution, or cost for a company, to remain in business. It is the lowest amount of money that any given organization incurs to survive. It is the smallest sum the government, unions, or other stakeholders cover when they demand that a firm endure a set of conditions in exchange for funding or support. The higher the absolute cost, the harder it is for entrepreneurs to operate.

Absolute cost is the least amount of money an organization must spend on a new service or product to make that service or product available to its customers. This is often referred to as the “cost-of-business” measure and refers to the total expenditure required to produce and deliver goods or provide access to those goods in any case (whether or not the customer uses them). The price includes all costs associated with building, maintaining, and monitoring the network, including staff costs, capital invested in hardware or software (usually referred to as fixed costs), retained by the supplier to support ongoing R&D activities and development on the product. Absolute cost, or AC, is the economic burden an organization faces that is beyond the capacity of the business to bear without significant external help.

Absolute cost is the cost (including salary and benefits) that an organization incurs when it is realistic to compete in a marketplace and attract customers. It is the cost that an organization incurs to meet its objectives, without regard to profit or loss.