What are the actual costs?
The actual costs are the total number of materials, labor costs and all directly related overhead costs that can be charged to a specific project. The actual costs differ from standard costs, although both approaches are often used to evaluate the profitability of the project. The aim is to divide the specifics of the project -related costs and determine whether the production process associated with the project actually works with optimal efficiency.
Understanding the difference between standard costs and actual costs is very important when looking at the expenses associated with the work or project. Standard costs assume standard value and use this number to monitor resource use. This monitoring is usually in the form of hours or the number of units consumed and can identify the scattering between production and consumption. On the other hand, the actual costs only relate to the costs incurred during the project and not produced units.
Determination of actual costs is very important in terms of assessing the profitability of any production process. Knowing how much it really costs to engage in this production for a specific period, such as the Moon, makes it easier to compare income that is generated in the same period. If the actual costs were exceeded by the amount of income received in the same period, then the company works with profit. If this is not the case, this calculation of actual costs may motivate business owners to look more closely at each cost associated with the production process and identify ways to reduce costs and increase the chance of profitability.
Comparison of the actual production costs from a given period to previous periods can also help identify situations where production costs increase for some reason. IF This increase will prove to be a permanent trend, the view of each of the relevant factors can bring traces of what to do with what se For example, the investigation may reveal that excessive overtime is the reason for higher production costs. If this is the case, the company can carefully seek reasons why overtime, and see if there is a better way to ensure the use of work to balance this increase. From this point of view, the calculation of actual costs is considered a valuable tool that helps maintain the effective production process, thus maximizing the opportunity to generate the highest amount of possible profits from the process.