Which of the following types of business units generates revenue and incurs costs?

Fixed costs

Cost is any disbursement made by a company to maintain its production process of goods or services (purchases of raw materials, transportation of products, etc.).Expense are all disbursements or payments made by the company to produce the product or service, but which are not directly linked to the manufacturing process (salaries of administrative personnel).The difference between cost and expense in accounting is that costs are considered investments that are directly identified with income. While expenses are not associated with the return from the sale of the product or service.In addition, costs and expenses are accounted for differently. Costs are considered assets, while expenses are not.

What are revenues, costs and expenses?

The difference between cost and expense in accounting is that costs are considered investments that are directly identified with revenue. While expenses are not associated with the return on the sale of the product or service. … It is indispensable to generate revenue. It generates a return of money.

What are the costs of a business?

Cost is an investment in money that a natural person or a company makes in order to produce a product, market merchandise and/or provide services.

What are the types of cost systems?

Cost systems can be classified according to the treatment of fixed costs, according to the way costs are concentrated and according to the costing method. Cost systems according to the treatment of fixed costs can be: absorption cost systems and variable cost systems.

Indirect Costs

Continuing with the topics of Economics Concepts, today we talk about the different expenses of the company, elements that are fundamental to ensure the future of any company. A well-managed company must analyze its expenses in great detail and understand and control, not only how they impact its business, but how they develop with changes in its business, and especially with business reductions.

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An important part of this expense analysis is its impact on pricing and production policy. That is, what prices companies set for their products or services are influenced by their costs and the level of production takes into account whether the prices they earn from the sale of their products or services cover the company’s expenses.

A company’s expenses can be divided into variable expenses, fixed expenses and marginal expenses, and direct expenses and indirect expenses must also be taken into account. Finally, there are cash expenses and expenses that impact profit but do not involve an outlay by the company. It is not always clear whether an expense is variable or fixed, direct or indirect.

What are costs and types of costs?

Cost, also called cost, is the economic outlay made for the production of some good or the provision of some service. Cost includes the purchase of inputs, payment of labor, production expenses and administrative expenses, among other activities.

How are example costs classified?

They are subdivided into raw material, labor and indirect manufacturing costs: Raw material costs The cost of materials integrated into the product. … Labor costs This is the cost that is directly involved in the transformation of the product. For example, the salary of the mechanic, the welder, etcetera.

What are sample costs and expenses?

Examples of costs are: raw materials, direct labor, factory maintenance, industrial safety, etc. Examples of expenses are: advertising and publicity, employee training, office rent, distribution, etc.

Types of production costs

Among the investment alternatives, the following stand out: the installation of a new business, the expansion of existing plant capacity and the modernization of production facilities. The issue to be developed in this work is how to determine the profitability and risk of this alternative, so it is necessary to project a cash flow of the business under certain assumptions and define the cost of money.

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Likewise, in order to carry out an investment, financial resources are required, either money or funds, so it is necessary to determine the financing options and measure their impact on the profitability and risk of the investment. These sources of resources have a cost, “but must be compensated by the investment to be financed; in principle, financing will be convenient when its percentage cost is equal to or less than the return or profitability of the investment.

The company, through debt, assumes a commitment, a payment obligation, which it has to honor or pay, regardless of whether the business results are satisfactory or not. On the other hand, through the investors’ capital contribution, the company offers an expectation of profit to the extent that the net results, after paying the debt, are satisfactory; therefore, the investors participate directly or indirectly in the management of the business.

How are revenues, costs and expenses classified?

This classification is divided into two categories: direct costs and expenses, and indirect costs and expenses. … In case the answer is positive for both the association and the determination, the cost or expense is classified as direct; otherwise it is considered within the indirect category.

What are expenses?

The General Accounting Plan defines an expense as “decreases in the net worth of the company, whether in the form of outflows or decreases in the value of assets, or recognition or increases in liabilities, provided that they are not considered as distributions, monetary or otherwise, to shareholders or owners” …

What is the cost classification?

Direct costs: these are costs that are easily identifiable with the product or service offered by the company. Indirect costs: these costs are difficult to associate with a specific product or service. Normally their amount is known but referred to the whole company or to a set of processes.

Cost of production examples

The break-even point is defined as the level of revenue a business needs to cover total costs over a specific period of time. It is a tool that allows companies to assess the viability of the business by taking into account the balance between sales revenue and total costs, both fixed and variable.

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Fixed costs are those costs that a business incurs regardless of sales volume. These include rental costs, equipment, administration, insurance, advertising, supplies or salaries and social security, among others. They are identified as fixed because they remain constant regardless of the number of units being produced by the company and, therefore, are not directly related to the level of sales made by the company.

When a company reaches its break-even point (also known as break-even point), i.e. when it generates the same amount of income as expenses and net income is equal to zero, it can be said that the business is stabilized and no longer loses money, although it does not earn any either.