Each product sold on the market, each service that various firms and companies provide us with has its own cost. It is it that affects the price difference between goods of the same direction, but made from raw materials of different quality, with the involvement of specialists of different skill levels. What is the cost price?
The concept
This term is usually understood as the sum of the monetary costs incurred by the manufacturer of the goods for its manufacture, packaging, transportation and sale. The cost includes expenses on the purchase of raw materials, all kinds of materials for future products, fuel, for the delivery of these materials, the purchase of necessary equipment and machinery, wages for workers, etc. This also includes cash costs for the sale of manufactured products and the provision of a particular type of service. Costing performs a number of critical tasks. First of all, it is important for an entrepreneur to know how much money he spends on the production of a particular product in order to form the basis for setting the wholesale price for his products. Further, it is precisely thanks to the cost price and the calculation of the level of possible margins that a manufacturer can identify approximate profits from the sale of goods and services and the profitability of this type of activity. Thanks to the calculation of the cost of goods, you can find out whether the company is working effectively and how fully it uses its resources.
Cost of production. Its composition and types
The cost of goods and services depends on many factors, including the availability of modern equipment in production, its quantity and quality, the amount of labor and the level of its professional training (the salary of workers depends on this), etc.
It should be borne in mind that if the company decides to purchase new equipment or expand the staff, then this will naturally affect the price of products. When considering the classification of types of cost, it should be borne in mind that there are two such concepts as the cost of production and the cost of sales of goods and services. Basically, the types of cost are considered based on its composition. Here there is a certain classification, on which experts rely when determining the price of finished products.
For example, what is the difference between such types of cost as general and individual? The total cost of all products produced by the enterprise is obtained by calculating all the costs of materials, their delivery and production process. While the individual cost is calculated separately for each unit of goods.
Technological cost (or operating, unit) is the sum of those costs that were required to perform a specific operation. There are still such types of cost as workshop and production. The first reflects all the costs required to produce products in the workshop. This includes depreciation of equipment, the costs of its maintenance, and the salary of workers in the workshop, including social contributions. This type of cost is used to determine the estimated prices within the plant. Production cost is a broader concept. It includes both the shop price and various expenses (plant-wide, for auxiliary production).
Types of cost include also full, which covers absolutely all costs directly related to the manufacture and sale of products. Among other things, the full cost includes non-production costs: advertising a product or service, the cost of packaging and storage of goods, as well as its transportation from one point to another. There is another classification in which the types of costs differ in accordance with the calculation methods. These include the following: planned, regulatory and actual costs.