Some considerations on production costs

2개월 전
Dear readers, production costs are nothing more than those expenses needed to produce a product. It is important to know how to identify the elements of cost in order to determine the cost of your production. Costs can be made up of direct and indirect raw materials, as well as labor and indirect costs for the production of the product.

Public domain image taken from PIXABAY

In this sense, Govea. and Urdaneta (2012), express that the elements of the cost of production are three: inputs, labor and indirect production costs, according to the author, it is noted that the cost of production is the value of all goods and efforts that have been incurred or will be incurred to obtain a finished product.

With all the above mentioned, it can be evidenced that the cost of production is what is generated in the process of transforming the raw material to the finished product, besides being the necessary expenses to maintain a project, processing line or equipment in operation within the organization so that it can reach its objective, which is to produce.

Public domain image taken from PIXABAY

Once the product is finished, the second phase is to determine its cost. It is for this reason that a structure is made and through it the actual result is obtained. According to Moreno (2013), ''The cost structure in the development and marketing of any product is due to a number of factors that determine the initial value of the product, i.e. everything that is spent to make it possible for it to reach the users. Among these factors are the salaries of the workers who manufacture the product, the cost of the materials used in its manufacture, transportation costs, electricity costs, among others.

That is, through this structure, it determines all the phases from the beginning to the end of the product, in addition to all the costs involved in reaching users for sale. Finally, it is important to note that you must have a person who has knowledge of cost structures, since it is essential to know how much it really costs to produce a product and how many phases must be carried out for it to reach each household.

Bibliographic references
Govea, J. and Urdaneta, M. (2012). Cost Accounting I. 1st edition. Fondo Editorial URBE, Maracaibo, Venezuela.

Moreno. Melean. (2013). Production costs in dual-purpose cattle farms in the municipality Yalmore Rodriguez, Zulia State-Venezuela. Published Degree Work. Universidad del Zulia faculty of economic and social sciences.

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Such a nice post I must admit. Well, elaborated and the explanation was top notch. In a nutshell there is no way we can achieve the second step without the first process. It is the data that you got from the first that you can use to determine the second.

Take for instance if you spend $1000 in all the first process, you can easily arrive at a better step two in other not to be at lost.

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Greetings friend, I am glad that the article is to your liking, thanks for leaving your contributions, no doubt if we want to have profits from our products, we must certainly take that first step and make a cost structure that shows us the real value of the product to be able to market it.

See you later, have a great weekend.

Hi @amestyj

Wow I see that you have developed a whole commercial experience in this grocery trade, when you say "through this structure, determine all the phases from the beginning to the end of the product, in addition to all the costs involved in reaching users for sale", the doubt arises to me, regarding the variations of the exchange rate that reigns in Venezuela, how do you do to determine the cost of sales?

Best regards, be well.

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Greetings dear friend, in Venezuela for some time now companies have seen so much devaluation and prices are increasing every day. They made the decision to manage the structure in Dollars so it has a little more stability. Also, they first make an estimate of what they can spend and at the end they determine if the costs actually increased or if they were stable during the process.
It is important to keep in mind that in Venezuela having its currency totally devaluated, Venezuelans even though the dollar is not the official currency in the country have made their decision to manage prices in dollars so that their businesses have some commercial stability.

As for the sales of the products according to the cost is assigned the % of sales and thus go to market the product.

Hi @amestyj
These things are what I think make the difference in any business organized or not, details that let you know exactly what is spent and what is not, in what proportion, manpower, many things to consider. For that reason I consider that this should be done by someone prepared for that purpose.
And it is applicable in any business, it is necessary to do it to avoid selling something at a price that does not generate profits.

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Hello friend, thank you for your valuable contribution, no doubt this should be done by someone who has enough knowledge about it that is acquired with experience in order that you mention not to sell a product at a price that does not generate profits.

See you later, have a great weekend !

Greetings friend, definitely an important issue for anyone who offers a service or produces a product, properly determine the production costs is what will determine the real value of the product, in addition to the behavior of the profit and expenses that most affect the business.

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Hello friend @emiliomoron, thank you for your contribution, in a summarized and accurate way you mentioned the purpose of a cost structure, which is nothing more than determining the real value of the product.

See you later, have a great weekend.

Greetings @amestyj, production costs are of great relevance because they are immersed in each of the phases that a product goes through until it reaches the market, and it is always very important to evaluate the stages that the product goes through and the costs it accumulates in each of them, in case there is any failure to be able to give the best possible solution.

Very good contribution.

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Hello friend @chucho27 thanks to you for your valuable contribution, I know you have knowledge about it, knowing the cost in each process that is needed to produce a product is one of the keys to have a fair profit of the product we market.

See you later brother, have a great weekend.