Costs of production in the short term, their essence and relevance.

Costs, or otherwise costs, are the budget item that all business entities are actively trying to minimize. The balance sheet for the reporting period can contain a lot of costly articles, the main thing is that their value is normal and allows you to have a stable income, and thereby develop. The magnitude of costs applied to production activities is often correlated with the concept of production costs. In this regard, between different economic schools there are often heated discussions about whether it is worth attributing the cost of selling products to its total cost price. On the one hand, this expense item has an inextricable link with the product itself, since without a properly designed marketing policy it is impossible to provide a sales volume that would cover all costs. In this case it is clear that the enterprise is doomed to liquidation.

From the point of view of individual economic experts, the costs associated with the promotion of goods on the market and their advertising reach their maximum value during the production and distribution of innovative products, after which the curve of such costs on the chart tends to bottom. From this it follows that the producer, increasing the volume of production and sales, with the passage of time minimizes these costs and their share in the real cost price (at real cost is to understand all costs associated with the production and sale of products). Thus, in this situation, the yield curve has a vector that looks constantly upwards.

In this regard, there is an opinion that it is worth to differentiate the cost of production for production costs and implementation costs. Production costs in the short term may indicate how profitable the enterprise will be in the long term. Such costs include labor and material resources per unit of output, which, as a rule, should remain unchanged. But such an even course of events is peculiar only to a static and stable economy, which today is seen as an unreal idyll. The costs of production and sales of products are subject to changes from both external and internal factors, such as seasonal demand, changes in market conditions, innovations in production, and many others, including various force majeure circumstances. Production costs in the short-term period are optimized to a constant value, so it is much easier for most producers to establish a profitability threshold for each type of product.

In today's economic science, it is considered topical to classify the costs of transformational and transaction costs. If the first type of costs is associated with the process of processing materials into the final product of the sale, the second relates to such expenses as protection of a trading position, brand, or brand. These costs are not related to the creation of value of finished products. Production costs in the short term are mostly related to transformation costs.

Very often, uneven changes in total costs lead to the fact that with an increase in production volumes, costs in relation to a unit of production change. Such costs are also called averages. Average production costs are calculated as a ratio of gross costs and the amount of output produced. Initially, this type of costs has a large value, but in the process of growth in output, there is a tendency to reduce it. For small-scale production, it is of fundamental importance to minimize production costs in the short term, since this fact will allow fixing fixed costs at a certain level and not lowering the profitability threshold.