The damage is small, breaking nursery item (4)
I believe the answer is:
cost
'the damage' is the definition.
('damage' can informally mean a price or cost)
'small breaking nursery item' is the wordplay.
'small' becomes 's' (abbreviation - e.g. clothes size).
'breaking' indicates putting letters inside.
'nursery item' becomes 'cot' (bed for a baby).
's' inserted within 'cot' is 'COST'.
'is' acts as a link.
(Other definitions for cost that I've seen before include "Amount to pay" , "Fee" , "Come to" , "penalty" , "Charge" .)