Any enterprise that produces any goods or provides any services has a business plan. This is an annually compiled program containing a description of the company’s activities, the planned volume of products, revenue, profit and costs. In turn, it is the costs that give a person an idea of what the cost of production is.
Introducing new technologies, using the work of machinery and equipment, burning fuel and consuming materials, the company spends huge amounts of money on output. They are the basis of cost - the main indicator on which the
economic efficiency of the company is based.
Analysis of this indicator allows you to find the volume of production at which output will be profitable. The base cost is constant (in no way dependent on the volume of output) and variables (may vary depending on the volume indicators of the output of goods) costs. So what is the cost price and what is included in its composition?
This indicator is considered in the context of articles of costing, as well as the costs used to produce products. The basis of the calculation of the total cost are the following costs:
- material costs, including the cost of such components as raw materials, parts, components, etc .;
- depreciation of fixed equipment and fixed assets;
- salaries of workers involved in the production process;
- deductions from accrued wages: the so-called pension, social and insurance contributions;
- other expenses.
A more complete picture, telling what the cost is, represent the industry departments of the enterprise. Each department or workshop involved in the production of products has its own highly specialized costs. So, they include expenses for general and general production needs, for defective products and returnable waste, for remuneration of employees and deductions from it, for purchased components and services of third-party organizations, as well as other expenses. All these components are included in the structure of such a concept as workshop cost.
Each department, each workshop and each subsidiary production, directly or indirectly participating in the production, affects the underlying cost of goods. Therefore, the effective work of each participant in the production process allows minimizing the cost of sales, increasing revenue and, as a result,
net income. The profitable work of the company depends on these factors.
What is the cost of sales? All costs incurred by the enterprise for the sale of products, including the services of third-party organizations, transport and others, are included in this indicator. Selling products gives another such indicator as the cost of sales. The basis of this indicator is the cost of production of goods, marketing and management.
Thus, the cost is the cost expression of the sum of all costs incurred by the enterprise in the production, storage and marketing of products. And net profit is the main and main indicator of the organization, which it affects.