Production costs and their types

Each firm wants that the business opened by it brings the maximum profit. It is not always easy to do this, because any real opportunity is always limited by the demand for manufactured products and production costs. The main limit of income is still costs. In turn, they also affect the number of proposals. That is why the firm, considering prospects for the future, must necessarily analyze the costs that have already occurred.

The costs of production and their types are the costs to be faced in the process of activity for each production, regardless of the money invested and the output. These costs consist of material costs, expenses for promotion and sale of goods, payment of interest for a loan, labor costs for workers and other additional expenses.

All production costs are conventionally divided into "sedimentary" and actual. In the first case, they talk about the costs that have already completely left production and will never return. "Sedimentary" costs are no longer taken into account when making new decisions (considering the options for further development of production), and accounting for them are mainly related to various insurance cases, for example, writing off bad debts. If we talk about actual costs, then they in turn are divided into explicit and implicit. Explicit - this is the cost associated with cash costs for the purchase of necessary equipment, raw materials, payment of wages, rent of premises, etc. Implicit - this is the so-called one-time costs, for example, the costs associated with the production of a bright signboard, which will draw attention to the firm.

The costs of production and their types are divided into fixed and variable. Constant costs of production are costs that always remain unchanged, regardless of the reduction and increase in output. This includes the payment of rent of premises, wages for workers, insurance contributions, equipment costs, etc. Constant costs can be divided into starting and residual. Starting - these are the costs that arise with the beginning of production and the sale of goods. Residuals are those costs that a firm or enterprise continues to bear, even though the production or sale of goods has been stopped indefinitely.

Variable costs, on the contrary, are completely dependent on production volumes. Basically, they are associated with the costs of buying the necessary raw materials and labor. There are three types of variable costs - proportional (they change in the same proportion as production, sales), progressive (changing in a much larger proportion than production and sales), degressive (changing in much less proportion than sales and production). If the costs of production and their types represent the costs of a particular economic object, then public excerpts are the costs of materialized labor and all living things that are reflected in the value of manufactured products. Constant and variable production costs in total give total costs.

Thus, it can be safely stated that the costs of production and their types represent an internal assessment of all the costs that the firm makes in order to divert from the alternative application the necessary factors of its transformation. Such costs can be both internal and external. External is the assessment of those costs that are payments to labor providers. Internal, or unpaid, costs are costs associated with lost opportunities for more rational use of the acquired economic resource.