The costs of the company - this is the sum of all costs of manufacturing a product or service, expressed in monetary terms. In Russian practice, they are often called the cost price. Each organization, no matter what type of activity it is engaged, has certain costs. The costs of the company are the amounts that it pays for advertising, raw materials, rent, labor, etc. Many managers try to ensure the efficient operation of the enterprise at the lowest possible costs.
Consider the main classification of costs of the company. They are divided into constants and variables. Costs can be considered in the short and long term. The long term in the end makes all costs variable, since during this time some large projects can end and others start.
The costs of the company in the short term can be clearly divided into constants and variables. The first type includes costs that are not dependent on the volume of production. For example, deductions for depreciation of structures, buildings, insurance contributions, rent, salaries of managers and other employees related to senior management, etc. The fixed costs of the company are the mandatory costs that the organization pays even in the absence of production. Variable costs, on the contrary, directly depend on the activities of the enterprise. If production volumes increase, then costs increase. These include the cost of fuel, raw materials, energy, transportation services, wages of most employees, etc.
Why should a businessman divide costs into fixed and variable? This moment affects the functioning of the enterprise in general. Since variable costs can be controlled, the manager can reduce costs by changing the volume of production. And since the total costs of the enterprise are ultimately reduced, the profitability of the organization as a whole increases.
In economics, there is such a thing as opportunity costs. They are associated with the fact that all resources are limited, and the enterprise has to choose one way or another way to use them. Opportunity costs are lost profits. The enterprise management, in order to receive one income, deliberately refuses to receive other profits.
The opportunity costs of the company are divided into explicit and implicit. The first are those payments that the company would pay suppliers for raw materials, for additional rent, etc. That is, their organization can assume in advance. Explicit costs include cash costs for the rental or purchase of machine tools, buildings, machinery, utility bills, hourly wages for workers, payment of transportation costs, raw materials, components, semi-finished products, etc.
Implicit costs of the company belong to the organization itself. These cost items are not paid to unauthorized persons. This also includes profit that could be obtained on more favorable terms. For example, the income that an entrepreneur can get if he works elsewhere. Implicit costs include rental payments for land, a percentage of capital invested in securities, etc. Each person has a similar type of cost. Consider an ordinary factory worker. This person sells his time for a fee, but he could get a big salary in another organization.
So, in a market economy, it is necessary to strictly monitor the costs of the organization, you need to create new technologies, train employees. This will help improve production and better plan costs. And that means it will lead to an increase in the company's income.