Basically, ‘factor cost’ is the ‘input cost’ the producer has to incur in the process of producing something (such as cost of capital, i.e., interest on loans, raw materials, labour, rent, power, etc.).  

• This is also termed as ‘factory price’ or ‘production cost/price’. This is nothing but ‘price’ of the commodity from the producer’s side.  
• While the ‘market cost’ is derived after adding the indirect taxes to the factor cost of the product, it means the cost at which the goods reach the market, i.e., showrooms (these are the cenvat/central excise and the CST which are paid by the producers to the central government in India).  

Source: TMH Ramesh Singh