Economic, variable and implicit costs

For the production of any goods, services, works, certain labor and material resources are required . The costs of using and acquiring such in the value dimension are called production costs.

The volume and magnitude of costs primarily depends on the price set for the resources purchased. The goal of any company is to use the least amount of production resources, minimize costs and get the maximum possible profit.

In addition to costs associated with the release of goods, companies bear the costs of promoting and marketing products on the market. These costs include the costs of market research, the transportation of goods to consumers, the organization of advertising and other events. In value terms, these costs are called commercial costs or costs for the sale of products.

Also, any company pays taxes, taxes, transfers funds to a variety of trust funds, which also include internal costs of the enterprise.

Economic theory considers explicit (accounting) and implicit costs, as well as economic.

This difference is especially important for owners who decide where to invest their capital, from which option will be the maximum effect or profit.

Accounting accounts for only the apparent costs that are associated with the resources being purchased and used. They are reflected in the accounting documents of the organization.

Implicit costs show the alternative cost of labor and other unearned resources - capital, land, which the enterprise uses in its work.

To obvious costs include the wages of workers, payment of transportation costs, cash costs associated with the purchase and rental of equipment, machines, structures and buildings. This category includes payment to suppliers of material resources, utility payments, payment of insurance companies and services of banks.

Implicit costs include monetary assets. Polednie could be obtained by the company with more profitable use of its resources. For owners of capital, implicit costs include profits that could be obtained by investing funds not in the present, but in some other enterprise (business).

The alternative cost of a solution is determined by choosing the best solution available. Suppose a person decided to leave the position of chief mechanic of a state-owned enterprise and organized his private company. The alternative cost of labor will be formed from wages, which had to be abandoned. And the alternative value of capital invested in one's own business is a percentage that could be obtained if the money were placed in a bank or other business, or as dividends from the acquisition of shares.

Economic costs consist of explicit and implicit.

In addition to the above concepts, operate in such categories as fixed and variable costs. This is relevant when analyzing the work of an enterprise in the short term. This definition in the long term becomes meaningless, as any costs change.

Thus, fixed costs are expenses of the short-term period, which are not affected by the quantity of products produced. They include the costs of permanent factors of production. This group includes payment for bank loans, payment of interest on bonds, depreciation, rent, insurance payments, salaries of management personnel.

Variable costs are costs that depend on the volume of the goods produced. They represent the costs of variable factors of production. These include transportation costs, wages, materials, raw materials and electricity costs.