Product Code Database
Capital costs are fixed, one-time incurred on the purchase of real property, , construction, and equipment used in the production of goods or in the rendering of services. In other words, it is the total cost needed to bring a project to a commercially operable status. Whether a particular cost is capital or not depend on many factors such as accounting, , and materiality.
Capital costs are not limited to the initial construction of a factory or other business. Namely, the purchase of a new machine to increase production and last for years is a capital cost. Capital costs do not include labor costs (they do include construction labor). Unlike , capital costs are one-time expenses but payment may be spread out over many years in financial reports and tax returns. Capital costs are fixed and are therefore independent of the level of output.
They do not include the cost of the natural gas, fuel oil or coal used once the plant enters commercial operation or any on the electricity that is produced. They also do not include the labor used to run the plant or the labor and supplies needed for maintenance.
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