The Transaction cost is defined as the addition of the Fixed (overhead cost) and Variable costs of executing ( realize the work to be done ) work items in a proper sequence known as Frictional Cost

The transaction costs takes all the opportunity costs in terms of the Time, Energy and Money to make a transaction in the market. This will include Transportation and Communication costs. In short, One of the two costs i.e., Transaction cost and the Fixed cost will determines the economic batch size in a U-curve optimization (to determine the Optimal batch size by balancing Transaction cost and Holding cost).

Further Reading

http://www.innolution.com/resources/glossary/transaction-cost