Purchasing raw materials is a type of cost. Types of production costs

There is no production without costs. Costs - These are the costs of purchasing factors of production.

Costs can be calculated in different ways, which is why in economic theory, starting with A. Smith and D. Ricardo, there are dozens various systems cost analysis. By the middle of the 20th century. have developed general principles classifications: 1) according to the cost estimation method and 2) in relation to the amount of production (Fig. 18.1).

Economic, accounting, opportunity costs.

If you look at purchase and sale from the position of the seller, then in order to receive income from the transaction, it is first necessary to recoup the costs incurred for the production of the goods.

Rice. 18.1.

Economic (opportunity) costs - these are business costs incurred, in the opinion of the entrepreneur, by him in the production process. They include:

1) resources acquired by the company;
2) internal resources of the company that are not included in market turnover;
3) normal profit, considered by the entrepreneur as compensation for risk in business.

It is the economic costs that the entrepreneur is obligated to compensate primarily through price, and if he fails to do this, he is forced to leave the market for another field of activity.

Accounting costs - cash expenses, payments made by a company for the purpose of acquiring the necessary factors of production on the side. Accounting costs are always less than economic ones, since they take into account only the real costs of purchasing resources from external suppliers, legally formalized, existing in an explicit form, which is the basis for accounting.

Accounting costs include direct and indirect costs. The former consist of costs directly for production, and the latter include costs without which the company cannot operate normally: overhead costs, depreciation charges, interest payments to banks, etc.

The difference between economic and accounting costs is opportunity cost.

Opportunity costs - These are the costs of producing products that the firm will not produce, since it uses resources in the production of this product. Essentially, opportunity costs are this is the opportunity cost. Their value is determined by each entrepreneur independently based on his personal ideas about the desired profitability of the business.

Fixed, variable, total (gross) costs.

An increase in a firm's production volume usually entails an increase in costs. But since no production can develop indefinitely, costs are a very important parameter in determining optimal sizes enterprises. For this purpose, the division of costs into fixed and variable is used.

Fixed costs - costs that a company incurs regardless of the volume of its production activities. These include: rent for premises, equipment costs, depreciation, property taxes, loans, wages for management and administrative staff.

Variable costs - company costs that depend on the volume of production. These include: costs of raw materials, advertising, wages, transport services, value added tax, etc. When expanding production variable costs increase, and when contracted, decrease.

The division of costs into fixed and variable is conditional and is acceptable only for a short period, during which a number of factors of production are unchanged. In the long run, all costs become variable.

Gross costs - it is the sum of fixed and variable costs. They represent the firm's cash costs to produce products. The connection and interdependence of fixed and variable costs as part of general costs can be expressed mathematically (formula 18.2) and graphically (Fig. 18.2).

Rice. 18.2.

C - company costs; 0 - quantity of products produced; GS - fixed costs; US - variable costs; TS - gross (total) costs

Where RS - fixed costs; US - variable costs; GS - total costs.

Production costs- this is a set of expenses that enterprises incur in the process of production and sales of products.

Production costs can be classified according to many criteria. From the firm's perspective, individual production costs are identified. They directly take into account the expenses of the business entity itself. Entrepreneurial firms have different individual production costs. In some cases, industry average and social costs are taken into account. Social costs are understood as the costs of producing a certain type and volume of products from the perspective of the entire national economy.

There are also production costs and circulation costs, which are associated with the phases of capital movement. Production costs include only those costs that are directly related to material creation, to the production of a product. Distribution costs include all costs caused by the sale of manufactured products. They include additional and net distribution costs.

Additional distribution costs are the costs associated with transportation, warehousing and storage of products, their packaging and packaging, and bringing the products to the direct consumer. They increase the final cost of the product.

Expenses on advertising, rental of retail premises, costs of maintaining sellers and sales agents, and accountants form pure distribution costs, which do not create new value.

In market conditions, the economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use (economic costs).

From the standpoint of an individual firm, economic costs are the costs that the firm must bear in favor of the supplier of resources in order to divert them from use in alternative industries. Also, costs can be both external and internal. Costs in cash that the company incurs in favor of suppliers of labor services, fuel, raw materials, auxiliary materials, transport and other services are called external, or explicit (actual) costs. In this case, resource suppliers are not the owners of this company. Explicit costs are fully reflected in the accounting records of enterprises, and therefore they are called accounting costs.

At the same time, the company can use its own resources. In this case, costs are also inevitable. The costs of one's own resource and one that is independently used are unpaid, or internal, implicit (implicit) costs. The company considers them as equivalent to those cash payments which would be received for an independently used resource with its most optimal use.

Implicit costs cannot be identified with the so-called sunk costs. Sunk costs are costs that are incurred by the company once and cannot be returned under any circumstances. Sunk costs are not considered alternative costs; they are not taken into account in the company's current costs associated with its production activities.

There is also such a criterion for classifying costs as time intervals; during the second they take place. From this point of view, production costs in the short term are divided into constant and variable, and in the long term all costs are represented by variables.

Fixed costs(TFC) - those actual costs that do not depend on the volume of output. Fixed costs occur even when products are not produced at all. THEY are connected with the very existence of the company, i.e. with expenses for the general maintenance of a factory or plant (payment of rent for land, equipment, depreciation charges for buildings and equipment, insurance premiums, property tax, salaries to senior management personnel, payments on bonds, etc.) In the future, production volumes may change, but fixed costs will remain unchanged. Collectively, fixed costs are the so-called overhead costs.

Variable costs(TVC) - those costs that change with changes in the quantity of products produced. Variable costs include expenses for raw materials, materials, fuel, electricity, payment for transport services, payment for most of the labor resources(salary).

They also distinguish between total (total), average and marginal costs.

Cumulative, or total, production costs (Fig. 11.1) consist of the sum of all fixed and variable costs: TC = TFC + TVC.

In addition to total costs, the entrepreneur is interested in average costs, the value of which is always indicated per unit of production. There are average total (ATC), average variable (AVC) and average fixed (AFC) costs.

Average total costs(ATC) is the total cost per unit and is usually used for comparison with price. They are defined as the quotient of total costs divided by the number of units produced:

Average variable costs(AVC) is a measure of the cost of a variable factor per unit of output. They are defined as the quotient of gross variable costs divided by the number of units of production: AVC=TVC/Q.

Average fixed costs(AFC), fig. 11.2 - indicator fixed costs per unit of output. They are calculated using the formula AFC=TFC/Q.

In the theory of firm costs important role belongs to marginal cost (MC) - the cost of producing an additional unit of output in excess of the quantity already produced. MC can be determined for each additional unit of production by attributing changes in the amount of total costs to the number of units of production that caused these changes: MC=ΔTC/ΔQ.

The long-term period in the activity of a company is characterized by the fact that it is able to change the amount of all production factors used, which are variable.

The long-term ATC curve (Fig. 11.3) shows the lowest cost of production of any given volume of output, provided that the firm had the necessary time to change all its production factors. The figure shows that increasing production capacity at the enterprise will be accompanied by a decrease in the average total costs of producing a unit of output until the enterprise reaches the size corresponding to the third option. A further increase in production volumes will be accompanied by an increase in long-term average total costs.

The dynamics of the long-run average total cost curve can be explained using the so-called economies of scale.

As the size of the enterprise grows, a number of factors can be identified that determine the reduction in average production costs, i.e. giving positive economies of scale:

labor specialization;
specialization of management personnel;
efficient use of capital;
production of by-products.

Diseconomies of scale mean that over time, expansion of firms can lead to negative economic consequences and, therefore, to increased unit production costs. The main reason for the occurrence of negative economies of scale is associated with certain management difficulties.

In the economic practice of our country, the category “cost” is used to determine the value of production costs. Under cost of production understand the cash current costs of enterprises for its production and sale. Cost shows how much it costs to this enterprise manufacturing and marketing of products. The cost reflects the level of technology, organization of production and labor at the enterprise, and business results. Its comprehensive analysis enables enterprises to more fully identify unproductive expenses, various types of losses, and find ways to reduce production costs. Cost is a consequence of the economic efficiency of capital investments, the introduction of new equipment and production technology, and equipment modernization. During development technical events it allows you to choose the most profitable, optimal options.

Based on the level and location of cost formation, a distinction is made between individual and industry average costs. Individual cost is the cost of production and sales of products that accumulate at each individual enterprise. Industry average cost is the cost of production and sales of products, which is the average for the industry.

According to the calculation methods, the cost is divided into planned, standard and actual. Planned cost usually means cost determined on the basis of planned (estimated) calculation of individual costs. The standard cost of a product shows the costs of its production and sale, calculated on the basis of current cost standards in effect at the beginning of the reporting period. It is reflected in standard calculations. The actual cost expresses the costs incurred in the reporting period for the production and sale of a certain type of product, i.e. actual resource costs. The actual cost of production of specific products is recorded in reporting estimates.

Based on the degree of completeness of cost accounting, a distinction is made between production and commercial costs. Production cost form all costs associated with the manufacture of products. Non-production costs (costs of containers, packaging, delivery of products to the destination, sales costs) are taken into account when determining commercial costs. The sum of production and non-production costs forms the total cost.

The cost corresponds to accounting costs, i.e. does not take into account implicit (imputed) costs.

The cost of products (works, services) of an enterprise includes costs associated with use in the production process natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources and other costs for its production and sale.

Other cost elements are following costs and deductions:

for preparation and development of production;
related to the maintenance of the production process;
related to production management;
to ensure normal working conditions and safety precautions;
for payments provided for by labor legislation for unworked time; payment for regular and additional holidays, payment for working time for performing government duties;
contributions to state social insurance and Pension Fund from labor costs included in the cost of production, as well as the employment fund;
contributions for compulsory health insurance.

Basic concepts of the topic

Production costs. Distribution costs. Net and additional distribution costs. Opportunity costs. Economic and accounting costs. Explicit and implicit costs. Sunk costs. Fixed and variable costs. Gross, average and marginal costs. Manufacturer's gain. Isocosta. Producer equilibrium. Effect of scale. Positive and negative economies of scale. Long-run average costs. Short-term costs.

Control questions

What is meant by production costs?
How are distribution costs divided?
What is the difference between economic and accounting costs? Explain their purpose.
What are the costs called, the value of which does not depend on the volume of output?
What are variable costs? Give an example of these costs.
Are so-called sunk costs taken into account in current costs?
How are gross (total), average and marginal costs determined and what is their essence?
What is the relationship between marginal cost and marginal productivity (marginal product)?
Why are average and marginal cost curves U-shaped in the short run?
Knowing what costs allows us to determine the amount of gain for the manufacturer (surplus for the manufacturer)?
What is meant by product cost and what types of it are used in domestic business practice?
What costs (explicit or implicit) does the category “cost” correspond to?
What is the name of a straight line that shows all combinations of resources whose use requires the same costs?
What does the descending nature of the isocost mean?
How can we explain the state of equilibrium of the producer?
If the combination of factors applied minimizes costs for a given amount of output, then it will maximize output for a given amount of costs. Explain this with a graph.
What is the name of the line that defines the long-term expansion path of a firm and passes through the tangency points of the isocosts and the corresponding isoquants?
What circumstances cause positive and diseconomies of scale?

Any business involves costs. If they are not there, then there is no product supplied to the market. To produce something, you need to spend money on something. Of course, the lower the costs, the more profitable the business.

However, following this simple rule requires the entrepreneur to take into account a large number of nuances reflecting the variety of factors influencing the success of the company. What are the most noteworthy aspects that reveal the nature and types of production costs? What does business efficiency depend on?

A little theory

Production costs, according to a common interpretation among Russian economists, are the costs of an enterprise associated with the acquisition of so-called “factors of production” (resources without which a product cannot be produced). The lower they are, the more economically profitable the business is.

Production costs are measured, as a rule, in relation to the total costs of the enterprise. In particular, a separate class of expenses may include those associated with the sale of manufactured products. However, everything depends on the methodology used in classifying costs. What are the options here? Among the most common in the Russian marketing school are two: the “accounting” type methodology, and the one called “economic”.

According to the first approach, production costs are the total set of all actual expenses associated with the business (purchase of raw materials, rental of premises, payment utilities, personnel compensation, etc.). The “economic” methodology also involves the inclusion of those costs, the value of which is directly related to the company’s lost profit.

In accordance with popular theories adhered to by Russian marketers, production costs are divided into fixed and variable. Those that belong to the first type, as a rule, do not change (if we talk about short-term time periods) depending on the growth or reduction in the rate of production of goods.

Fixed costs

Fixed production costs are, most often, such expense items as rent of premises, remuneration of administrative personnel (managers, executives), obligations to pay certain types of contributions to social funds. If they are presented in the form of a graph, it will be a curve that is directly dependent on the volume of production.

As a rule, enterprise economists calculate average production costs from those that are considered constant. They are calculated based on the volume of costs per unit of manufactured goods. Typically, as production volumes increase, the average cost “schedule” decreases. That is, as a rule, the greater the productivity of the factory, the cheaper the unit product.

Variable costs

The enterprise's production costs related to variables, in turn, are very susceptible to changes in the volume of output. These include the costs of purchasing raw materials, paying for electricity, and compensating staff at the specialist level. This is understandable: more material is required, energy is wasted, new personnel are needed. A graph showing the dynamics of variable costs is usually not constant. If a company is just starting to produce something, then these costs usually grow more rapidly in comparison with the rate of increase in production.

But as soon as the factory enters sufficiently intensive turnover, then variable costs, as a rule, do not grow so actively. As in the case of fixed costs, for the second type of costs it is often calculated average- again, in relation to the output of a unit of production. The combination of fixed and variable costs is the total cost of production. Usually they are simply added together mathematically when analyzed economic indicators companies.

Costs and depreciation

Phenomena such as depreciation and the closely related term “wear and tear” are directly related to production costs. By what mechanisms?

First, let's define what wear is. This, according to the interpretation widespread among Russian economists, is a decrease in the value of production resources. Wear and tear can be physical (when, for example, a machine or other equipment simply breaks down or cannot withstand the previous rate of production of goods), or moral (if the means of production used by the enterprise, say, are much inferior in efficiency to those used in competing factories ).

A number of modern economists agree that obsolescence is a constant cost of production. Physical - variables. The costs associated with maintaining production volumes of goods subject to wear and tear of equipment form the same depreciation charges.

As a rule, this is associated with the purchase of new equipment or investments in the repair of current equipment. Sometimes - with change technological processes(for example, if a machine producing spokes for wheels breaks down at a bicycle factory, their production may be outsourced temporarily or on an indefinite basis, which, as a rule, increases the cost of producing finished products).

Thus, timely modernization and purchase of high-quality equipment is a factor that significantly influences the reduction of production costs. Newer and more modern equipment in many cases involves lower depreciation costs. Sometimes the costs associated with equipment wear and tear are also influenced by the qualifications of the personnel.

As a rule, more experienced craftsmen handle equipment more carefully than beginners, and therefore it may make sense to spend money on inviting expensive, highly qualified specialists (or invest in training young people). These costs may be lower than investments in depreciation of equipment subject to intensive use by inexperienced beginners.

Firm. Production costs and their types.

Parameter name	Meaning
Article topic:	Firm. Production costs and their types.
Rubric (thematic category)	Production

Firm(enterprise) is an economic unit that realizes its own interests through the production and sale of goods and services through the systematic combination of factors of production.

All firms can be classified according to two main criteria: the form of ownership of capital and the degree of concentration of capital. In other words: who owns the company and what is its size. Based on these two criteria, various organizational and economic forms are distinguished entrepreneurial activity. This includes public and private (sole proprietorships, partnerships, joint stock) enterprises. According to the degree of concentration of production, small (up to 100 people), medium (up to 500 people) and large (more than 500 people) enterprises are distinguished.

Determining the size and structure of the costs of an enterprise (firm) for the production of products that would provide the enterprise with a stable (equilibrium) position and prosperity in the market is the most important task economic activity at the micro level.

Production costs - These are expenses, monetary expenditures that are extremely important to carry out to create a product. For an enterprise (firm), they act as payment for acquired factors of production.

The majority of production costs comes from the use of production resources. If the latter are used in one place, they cannot be used in another, since they have such properties as rarity and limitation. For example, the money spent on buying a blast furnace for the production of pig iron cannot simultaneously be spent on the production of ice cream. As a result, by using a resource in a certain way, we lose the opportunity to use this resource in some other way.

Due to this circumstance, any decision to produce something makes it extremely important to refuse to use the same resources for the production of some other types of products. Thus, costs are opportunity costs.

Opportunity Cost- these are the costs of producing a product, assessed in terms of the lost opportunity to use the same resources for other purposes.

From an economic point of view, opportunity costs can be divided into two groups: “explicit” and “implicit”.

Explicit costs- These are opportunity costs that take the form of cash payments to suppliers of factors of production and intermediate goods.

Explicit costs include: workers' wages (cash payments to workers as suppliers of the production factor - labor); cash costs for the purchase or payment for the rental of machines, machinery, equipment, buildings, structures (cash payments to capital suppliers); payment of transportation costs; utility bills (electricity, gas, water); payment for services of banks and insurance companies; payment to suppliers of material resources (raw materials, semi-finished products, components).

Implicit costs - this is the opportunity cost of using resources owned by the firm itself, ᴛ.ᴇ. unpaid expenses.

Implicit costs are presented as:

1. Cash payments that a company could receive if it used its resources more profitably. This can also include lost profits ("costs of lost opportunities"); wages, which the entrepreneur could get by working somewhere else; interest on capital invested in securities; rent payments for land.

2. Normal profit as the minimum remuneration to an entrepreneur that keeps him in the chosen industry.

For example, an entrepreneur engaged in the production of fountain pens considers it sufficient for himself to receive a normal profit of 15% of the invested capital. And if the production of fountain pens gives the entrepreneur less than normal profit, then he will move his capital to industries that give at least normal profit.

3. It is important to note that for the owner of capital, implicit costs are the profit that he could have received by investing his capital not in this, but in some other business (enterprise). For a peasant who owns land, such implicit costs will be the rent that he could receive by renting out his land. For an entrepreneur (including a person engaged in ordinary labor activity) the implicit costs will be the salary that he could have received for the same time, working for hire at any company or enterprise.

However, Western economic theory includes the income of the entrepreneur in production costs. Moreover, such income is perceived as a payment for risk, which rewards the entrepreneur and encourages him to keep his financial assets within the boundaries of this enterprise and not divert them for other purposes.

Production costs, including normal or average profit, are economic costs.

Economic or opportunity costs in modern theory are considered to be the costs of a company incurred in the conditions of making the best economic decision on the use of resources. This is the ideal to which a company should strive. Of course, the real picture of the formation of total (gross) costs is somewhat different, since any ideal is difficult to achieve.

It must be said that economic costs are not equivalent to those with which accounting operates. IN accounting costs The entrepreneur's profit is not included at all.

Production costs, which are used by economic theory, compared with accounting distinguishes the assessment of internal costs. The latter are associated with costs incurred through the use of own products in production process. For example, part of the harvested crop is used to sow the company's land. The company uses such grain for internal needs and does not pay for it.

In accounting, internal costs are accounted for at cost. But from the standpoint of setting the price of a released product, costs of this kind should be assessed at the market price of that resource.

Internal costs - These are associated with the use of the company’s own products, which turn into a resource for the company’s further production.

External costs - This is the cost of money that is used to acquire resources that are the property of those who are not the owners of the company.

Production costs, which are realized in the production of a product, can be classified not only depending on what resources are used, be it the resources of the company or the resources that had to be paid for. Another classification of costs is possible.

Fixed, variable and total costs

The costs that a firm incurs in producing a given volume of output depend on the possibility of changing the amount of all employed resources.

Fixed costs(FC, fixed costs)- these are costs that do not depend in the short term on how much the company produces. Οʜᴎ represent the costs of its constant factors of production.

Fixed costs are associated with the very existence of the firm's production equipment and must be paid for this, even if the firm does not produce anything. A firm can avoid the costs associated with its fixed factors of production only by completely ceasing its activities.

Variable costs(US, variable costs)- These are costs that depend on the volume of production of the company. Οʜᴎ represent the costs of the firm's variable factors of production.

These include costs of raw materials, fuel, energy, transport services, etc. Most of variable costs typically account for labor and materials. Since the costs of variable factors increase as output increases, variable costs also increase with output.

General (gross) costs for the quantity of goods produced - these are all the costs of this moment the time required to produce a particular product.

In order to more clearly determine the possible production volumes at which the company guarantees itself against excessive growth of production costs, the dynamics of average costs is examined.

There are average constants (AFC). average variables (AVC) PI average general (PBX) costs.

Average fixed costs (AFS) represent an attitude fixed costs (FC) to production volume:

AFC = FC/Q.

Average variable costs (AVQ represent the ratio of variable costs (VC) to production volume:

AVC=VC/Q.

Average total costs (PBX) represent the total cost ratio (TC)

to production volume:

ATS= TC/Q =AVC + AFC,

because TS= VC + FC.

Average costs are used when deciding whether to produce a given product at all. In particular, if the price, which represents the average income per unit of output, is less than AVC, then the firm will reduce its losses by suspending its activities in the short term. If the price is lower ATS, then the firm receives negative economics; profits and should consider permanent closure. Graphically this situation should be depicted as follows.

If average costs are lower than the market price, then the company can operate profitably.

To understand whether profitable production additional unit of output, it is extremely important to compare the resulting change in income with the marginal cost of production.

Marginal cost(MS, marginal costs) - These are the costs associated with producing an additional unit of output.

In other words, marginal cost is an increase TS, the firm must go to ĸᴏᴛᴏᴩᴏᴇ in order to produce another unit of output:

MS= Changes in TS/ Changes in Q (MC = TC/Q).

The concept of marginal cost is of strategic importance because it identifies costs that a firm can directly control.

The equilibrium point of the firm and maximum profit is reached when marginal revenue and marginal cost are equal.

When a firm has reached this ratio, it will no longer increase production, output will become stable, hence the name - equilibrium of the firm.

Firm. Production costs and their types. - concept and types. Classification and features of the category "Company. Production costs and their types." 2017, 2018.

Costs(cost) - the cost of everything that the seller has to give up in order to produce the goods.

To carry out its activities, the company incurs certain costs associated with the acquisition of necessary production factors and the sale of manufactured products. The valuation of these costs is the firm's costs. Most economically effective method production and sale of any product is considered to be such that the company’s costs are minimized.

The concept of costs has several meanings.

Classification of costs

Individual- costs of the company itself;
Public- the total costs of society for the production of a product, including not only purely production, but also all other costs: protection environment, Preparation qualified personnel and so on.;
Production costs- these are costs directly associated with the production of goods and services;
Distribution costs- related to the sale of manufactured products.

Classification of distribution costs

Additional costs circulation includes the costs of bringing manufactured products to the final consumer (storage, packaging, packing, transportation of products), which increase the final cost of the product.
Net distribution costs- these are costs associated exclusively with acts of purchase and sale (payment of sales workers, keeping records of trade operations, advertising costs, etc.), which do not form a new value and are deducted from the cost of the product.

The essence of costs from the perspective of accounting and economic approaches

Accounting costs- this is a valuation of the resources used in the actual prices of their sale. The costs of an enterprise in accounting and statistical reporting appear in the form of production costs.
Economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use. Essentially all costs are opportunity costs. The economist's task is to choose the most optimal option for using resources. Economic costs resource chosen for the production of a product are equal to its cost (value) under the best (of all possible) option for its use.

If an accountant is mainly interested in assessing the company’s past performance, then an economist is also interested in the current and especially projected assessment of the firm’s performance, searching for the most optimal option use of available resources. Economic costs are usually greater than accounting costs - this is total opportunity costs.

Economic costs, depending on whether the firm pays for the resources used. Explicit and implicit costs

External costs (explicit)— these are costs in cash that a company makes in favor of suppliers of labor services, fuel, raw materials, auxiliary materials, transport and other services. In this case, the resource providers are not the owners of the firm. Since such costs are reflected in the balance sheet and report of the company, they are essentially accounting costs.
Internal costs (implicit)— these are the costs of your own and independently used resource. The company considers them as the equivalent of those cash payments that would be received for an independently used resource with its most optimal use.

Let's give an example. You are the owner of a small store, which is located on premises that are your property. If you didn’t have a store, you could rent out this premises for, say, $100 a month. These are internal costs. The example can be continued. When working in your store, you use your own labor, without, of course, receiving any payment for it. With an alternative use of your labor, you would have a certain income.

The natural question is: what keeps you as the owner of this store? Some kind of profit. The minimum wage required to keep someone operating in a given line of business is called normal profit. Lost income from the use of own resources and normal profit in total form internal costs. So, from the standpoint of the economic approach, production costs should take into account all costs - both external and internal, including the latter and normal profit.

Implicit costs cannot be identified with the so-called sunk costs. Sunk costs- these are costs that are incurred by the company once and cannot be returned under any circumstances. If, for example, the owner of an enterprise incurs certain monetary expenses to have an inscription made on the wall of this enterprise with its name and type of activity, then when selling such an enterprise, its owner is prepared in advance to incur certain losses associated with the cost of the inscription.

There is also such a criterion for classifying costs as the time intervals during which they occur. The costs that a firm incurs when producing a given volume of output depend not only on the prices of the factors of production used, but also on which ones. production factors are used and in what quantities. Therefore, short- and long-term periods in the company’s activities are distinguished.