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How to calculate the cost of production

How to calculate the cost of production

The costs for production, as well assubsequent implementation of the produced goods represent total consumption of all the necessary factors of production (materials, fixed assets, raw materials, energy, fuel, labor).

As a rule, the costs must be expressed in monetary terms.



The total cost can be calculated as the sum of fixed and variable costs of the company. They represent the cash value of the company, which was spent on production.


To calculate the size of the average costs must be total costs divided by the number of output. This total costs required per unit of output.


In turn, economic or imputedcosts are economic costs that the company incurred in the normal course of business. The composition of these costs include: resources acquired organization, its internal resources, normal profit, which is considered as the owner of the value of certain compensation for the risks in the business.


That is why the economic cost of a businessmanIt imposes itself as an obligation to pay them through the price in the first place, and if he fails, he will be forced to withdraw from the market in some other sphere of production.


There are other - accounting costswhich implies a cash expenditures made by the company in order to acquire the necessary factors of production on the side. This accounting costs are always less economical because they take into account only the actual costs spent on the purchase from external suppliers of the necessary resources, and the existing legally appointed explicitly, which will serve as a basis for drawing up the accounting.


In turn, the accounting costs are incomposed of: direct and indirect costs. Direct costs consist of the costs spent only on production. Indirect costs include all costs, without which the company simply can not function properly: overhead, interest payments to banks depreciation.


Opportunity costs - by all means,spent on the production of those goods that the company will not produce as applying resources in the production of this product. Thus, the opportunity cost - all costs of missed opportunities. To find the opportunity cost, it is necessary to deduct the costs of the economic cost accounting.

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