According to the estimate, revealed by a military official, construction of the launch site is expected to cost the North $400 million, while the rocket and its payload will cost $300 million and $150 million, respectively.
The North says the rocket launch set for sometime between April 12 and 16 is designed to put an earth observation satellite into orbit. Pyongyang also says it has a sovereign right to fire the rocket for the peaceful exploration of space, though the launch is widely seen as a disguised test of international ballistic missile technology banned under a U.N. resolution.
The Seoul official said that the rocket's expenses of $850 million are enough to buy 2.5 million tons of corn from China and thus can feed 19 million of the North's 24 million population for a year.
"North Korea has suffered a deficit of 400,000 tons of food every year. So, the money could resolve the problem of food shortages for six years," the official said.
Separately, North Korea is expected to spend $2 billion to celebrate the 100th anniversary of the birth of late President Kim Il-sung, the country's founder and grandfather of current leader Kim Jong-un, which falls on April 15, according to the official.
Rebuffing a chorus of international warnings, North Korea has vowed to press ahead with its rocket launch plan, a move that is certain to invite stronger punitive actions from the international community.
Together with its nuclear weapons program, the North's missile program has long been a regional security concern.
Pyongyang last launched a long-range rocket in April 2009 and conducted its second nuclear test a month later.
The official said North Korea might conduct a third nuclear test or stage a military provocation after the planned rocket launch.
"Internal and external circumstances are similar to those in the 2009 rocket launch," the official said. "There is a high possibility that North Korea could carry out a nuclear test or an additional military provocation."
Seoul's military officials said North Korea moved the main body of a three-stage rocket to the launch site in Dongchang-ri in the North's northwest for final preparations for the liftoff.
North Korea is believed to have advanced ballistic missile technology, though it is still not clear whether it has mastered the technology to put a nuclear warhead on a missile.
The total burn time for the three-stage rocket has been estimated at 317 seconds -- 112 seconds for the first stage, 180 seconds for the second and 25 seconds for the third, the official said.
South Korea and Japan have warned they would shoot down the rocket if it goes off course and violates their airspace.
"If North Korea is unsuccessful in the launch, parts of the rocket could fall into our sea," the official said, adding South Korea and the U.S. are preparing for "various measures" to intercept the rocket in case of endangering the South Korean territory or retrieve it.
About 28,500 U.S. troops are stationed in South Korea, a legacy of the 1950-53 Korean War.
North Korea is just coming out of the 100-day mourning period set for its late leader Kim Jong-il who died on Dec. 17 of a heart attack.