Cost is one of the key indicators used to characterize the economic and production activities of the company. The cost of a product is the financial cost of producing and selling it in monetary terms.
The lower the cost of production, the more labor saving, the more efficient the use of materials, fixed assets, fuel, the cheaper the production of products is for the organization.
The cost price as an economic indicator reflects how much it cost an enterprise to manufacture a certain product, product and its sale. The prime cost is the expenses or expenses of the company for the manufacture and further sale of products. Production management in the future, control over the observance of economic indicators established initially depends on the efficiency of cost formation.
The cost price is defined as the costs for certain types of activities. These costs include costs that occurred in the manufacture and further sale of products, in the purchase and sale of goods, costs related to the implementation of work, the provision of services.
The cost price includes:
1. Expenditures of financial resources, human resources and objects of labor for the process of manufacturing products: material expenditures for the development and launch of the production process; for the manufacture of products directly; rationalization costs; expenses for training or retraining of personnel, recruitment of personnel, pension contributions, medical and social insurance; financial expenses for production management.
2. Costs related to the marketing of products: storage, loading, packaging, transportation costs; expenses for advertising services such as fairs, exhibitions, etc.
3. Costs that do not relate to the production and sale of the company's products directly, but they are reimbursed by taking them into account in the cost of production for the sake of reproduction (payment for water, payment for wood).
The cost of production also includes losses from rejects, shortages in warehouses and production of material assets within the framework of the norms of natural loss, from downtime for reasons at work, etc.
The calculation of the cost price is necessary in order to estimate the fulfillment of the plan; determine the profitability of production; to carry out cost accounting in production; look for reserves to reduce the cost of production; calculate the economic efficiency of the use of new technologies, equipment, measures; make a justification for the decision to release new types of goods and remove obsolete types from production.
