What are the main costs?
The first costs are the expenses incurred in the product production. The cost of this type is usually considered to be direct costs, as these expenses affect the appearance, feeling and quality of the real product. Indirect costs, such as administrative support for order processing and similar tasks, are usually not included as the main costs.
A simple formula for determining the total amount of main costs associated with the production of goods or services is to add direct labor costs for direct material costs. For example, a company that produces a number of preserved soft drinks would include the cost of materials needed to produce a container for the product itself, money spent to create a container and the cost of ingredients to create any type of non -alcoholic beverage. Regarding the direct cost of work, the main costs would include wages and benefits paid to employees who are involved in the creation of a soft drink and their packaging. InWhich calculations are even deemed to be the main expenses and are included in the calculation.
The identification of the main costs is very important to the manufacturer. This allows you to understand exactly how much money is invested in each product unit produced. This, in turn, allows business to identify the minimum purchase price for a unit that needs to be obtained to balance these costs. By allowing the enterprise to allow factors such as prices used by competitors
By monitoring the main costs of one accounting period to another, the Company can determine whether changes in direct material or direct labor costs are a hazardous impact on the profit range. If so, the company can start looking at each of these direct costs and determine whether there is any way to reduce costs without reducing the quality of the product. This is sometimesManaged by streamline the production process of working costs or finding new suppliers for one or more raw materials used in the process. The same approaches can also be used if changes in the market cause it to reduce the unit price for growth or at least maintaining the share of the company's market.