Costs for the production and sale of goods represent the sum of the costs of certain factors, for example, materials, fixed assets, raw materials, fuel, labor, etc. Costs are usually expressed in monetary terms.
Instructions
Step 1
Total cost is the amount of money a company spent on manufacturing a product. To calculate these, add the firm's fixed and variable costs. To calculate the average cost for a given period, divide the total cost by the quantity of goods produced.
Step 2
Imputed or economic costs are an indicator of the business costs incurred by the enterprise. These expenses include the resources acquired by the organization, its internal resources, and also profit. There are also accounting costs, implying the costs that a company incurs to acquire certain factors of production. Accounting costs cannot exceed economic costs, since they take into account only real costs aimed at acquiring the necessary resources from external suppliers, which is a legally formalized fact and is the basis for indicating in accounting.
Step 3
Accounting costs are divided into direct and indirect. Direct costs include production costs only. Indirect costs include all costs that an enterprise needs for its normal functioning: overhead costs, depreciation charges, interest payments to banks, etc.
Step 4
Another group is opportunity costs, which are funds aimed at the production of additional goods and the provision of special services that are not the main focus of the enterprise. Opportunity costs are accepted to include all external costs or future costs based on financial analysis and production plan. To determine the opportunity cost, the accounting costs must be deducted from the economic costs.
