Cost in common usage means the monetary value of goods and services that producers and consumers purchase. In a basic economic sense, cost is the measure of the alternative opportunities forgone in the choice of one good or activity over others. This fundamental cost is usually referred to as opportunity cost. More economically, cost has to do with the relationship between the value of productive input and the level of output. The total cost refers to all the expense incurred in reaching a particular level of output. The assumption that cost is value is nearly misleading, although they may be equal where the improvements represent the highest and best use of land. As soon as a structure begins to age, cost and value tend to move apart owing to the impact of depreciation.
Cost is a measure of past expenditure while value is a measure of future rights to income or anticipated amenities resulting from ownership and utilization of a property. Cost approach to value is often adapted by Estate Surveyors and Valuers to obtain a reasonable opinion of value in an unstable economy and particularly where there is a dearth of information on recent transactions for comparison. It is derived from priced bill of quantities for a particular project ie unit cost per square meter basis with reference to specification, finishing etc and necessary adjustments to reflect the peculiar character of the property to be appraised on cost basis.
