Production costs and profits.
Under the production costs understand the cost of creating the goods. Expenses include expenses for the payment of raw materials, salaries of employees of the organization, depreciation, as well as other expenses associated with the activities of the enterprise. As a result of the sale of its products the company receives revenue. Some of the revenue offset production costs, while the other is net profit. This means that they must be less than the value of the goods produced by the amount of net profit. There are costs of production and circulation. The first include costs associated with the material existence of the product. And the second ones arise in connection with the sale of products manufactured by the enterprise. These include net and additional distribution costs. Net is the cost of renting retail space, advertising, revenue accounting. Additional arises in connection with the transportation, storage, storage and packaging of products.
Production costs and their classification.
Allocate explicit and implicit opportunity costs. The use of productive resources makes up most of them. Resources have the properties of rarity and limitation, that is, if they are used for some purposes, they can no longer be used for others. For example, spending money on the purchase of cement, you will not be able to subsequently spend it on the acquisition of gravel. Opportunity costs are considered from the point of view of the lost opportunity to use resources in another area. These include payments to persons working at the firm, owners of natural resources, and investors. These payments are made in order to attract factors of production, distracting from the alternative use case. Under the explicit costs understand the opportunity costs, expressed in the form of cash payments. Among the explicit ones are: salary, payment for raw materials, payment of transportation costs , utility bills, payment for bank services.
By implicit understand unpaid costs, in other words the opportunity costs of using the resources belonging to the organization.
Production costs and their classification.
There is a division of costs into economic and accounting. Economic - these are costs that include normal or average profit. These include the costs of the company, subject to the adoption of a better economic decision on the consumption of resources, that is, this is what should ideally be and what the company should strive for. Accounting, unlike economic, do not include the cost of production factors owned by the owners of enterprises.
Production costs and their classification.
Internal costs arise in connection with the use of our own products, turning into a resource for further production of goods by the company. External represent the cost of money for the acquisition of resources not owned by the enterprise.
Production costs and their classification.
Fixed costs arise regardless of the volume of production in the short term. They arise due to the existence of production equipment and must be paid under any conditions, even if the company does not produce goods. They can only be avoided by discontinuing the firm. If they cannot be avoided even in this case, then they are called irrevocable.
Variable costs - costs, depending on the volume of output of goods of the enterprise. These are the costs of raw materials, energy, fuel, transportation services, etc. The bulk of these costs are materials production.
Marginal - associated with the production of additional units of production.