what are the different types of costs that businesses pay for factors of production?
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The two basic types of costs incurred by businesses are fixed and variable. Fixed costs do not vary with output, while variable costs do. Fixed costs are sometimes called overhead costs. They are incurred whether a firm manufactures 100 widgets or 1,000 widgets.
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Indirect costs include administration, personnel and security costs. These are those costs which are not directly related to production. Some indirect costs may be overhead. But some overhead costs can be directly attributed to a project and are direct costs.
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There are two main types of cost centres: Production cost centres, where the products are manufactured or processed. Example of this is an assembly area. Service cost centres, where services are provided to other cost centres.
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The two basic types of costs incurred by businesses are fixed and variable. Fixed costs do not vary with output, while variable costs do. Fixed costs are sometimes called overhead costs. ... In a production facility, labor and material costs are usually variable costs that increase as the volume of production increases.
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Direct costs can be fixed costs such as the rent for a production plant. ... Variable costs can also be indirect costs such as electricity for the production plant since it can't be tied to one specific product.
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Although direct costs are typically variable costs, they can also include fixed costs. Rent for a factory, for example, could be tied directly to the production facility. Typically, rent would be considered overhead. However, companies can sometimes tie fixed costs to the units produced in a particular facility.
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Fixed costs are associated with the basic operating and overhead costs of a business. They include items such as building rent, utilities, wages, and insurance. Most forms of depreciation and tangible assets qualify as fixed costs as well. Fixed costs are considered indirect costs of production.
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The cost per unit is derived from the variable costs and fixed costs incurred by a production process, divided by the number of units produced.
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['Office expenses. You can include business stationery, printing costs (including printer ink), and postage. ... ', 'Business premises. ... ', 'Travel. ... ', 'Stock and materials. ... ', 'Legal and financial costs. ... ', 'Business insurance. ... ', 'Marketing. ... ', 'Clothing.']
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['Capital. Capital is one of the most important factors of production for the establishment of an enterprise. ... ', 'Labor. Easy availability of right type of workers also effect entrepreneurship. ... ', 'Raw Materials. ... ', 'Market. ... ', 'Infrastructure.']
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Fixed costs are expenses that remain the same regardless of production output. ... Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs.
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The total cost of producing a specific level of output is the cost of all the factors of input used. Often, economists use models with two inputs: physical capital, with quantity X and labor, with quantity L.
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Inventoriable costs are included in the cost of a product. ... Manufacturing overhead can include such costs as equipment depreciation, rent on the factory building, production management salaries, materials management staff compensation, factory utilities, maintenance parts, and so forth.
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Factor cost is the total amount which the manufacturer had to invest in production of a good or commodity. It doesn't include any taxes imposed on the final product. But, the market price is the final cost at which the manufacturer sells the goods to customers. And these are inclusive of all the applicable taxes.
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Variable costs are those that rise and fall with the production volume. Typically found in cost of goods sold, it does not always include everything in COGS.
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['materials.', 'direct labor, assuming it is hourly or otherwise dependent on output levels.', 'commissions for sales staff.', 'credit card fees on customer purchases.', 'equipment, perhaps including usage-based depreciation.', 'utilities for the production site.', 'shipping.']
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Variable costs vary with increases or decreases in production. Fixed costs remain the same, whether production increases or decreases. Wages paid to workers for their regular hours are a fixed cost.