What Is Cost Depletion?

Cost is the value category of the commodity economy and a component of the value of the commodity. In order to carry out production and operation activities or achieve a certain purpose, people must consume certain resources. The currency performance and objectification of the resources they consume are called costs. And with the continuous development of the commodity economy, the connotation and extension of the cost concept are constantly changing and developing. ^[1]

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General definition

1. Cost is the production and sale of certain types and quantities of products to consume resources.

1. According to concept formation can be divided into theoretical cost and

Costs in the eyes of economists

1. The cost of raw materials, materials, fuel, etc., which represents the cost of goods produced

The survey found that effective cost analysis is the basic factor for the success of an enterprise in the fierce market competition. Imperfect cost analysis can lead to a simple reduction in costs, thereby deactivating the business. Establishing a scientific and reasonable cost analysis and control system can enable the managers of the enterprise to clearly grasp the company's cost structure, profitability and the correct direction of decision-making. It has become the key support for internal decision-making of the enterprise and fundamentally improves the cost situation of the enterprise. Platinum Consulting believes that the correct cost analysis plays a very important role in whether a company is profitable. Due to the unfavorable cost analysis, the company may cause pricing errors due to failure to reasonably allocate the costs to different products, and thus fall into a strange circle of selling more and losing more for a long time. ^[2]

1. Cost is a measure of compensation for production costs.

2. Cost is the basis for setting product prices.

3 Cost is the basis for calculating a company's profit and loss.

4 Cost is the basis for making decisions.

5. Cost is an important indicator that comprehensively reflects the performance of an enterprise.

6. Costs can reflect countries and businesses

1. Improve business management, adopt new technologies, and increase equipment utilization.

2. Reduce consumption of fixed assets, save raw materials, fuel, auxiliary materials, and improve labor productivity.

3. Implement quota management to reduce manufacturing costs.

4. Strengthen

Expense and cost are two independent concepts, but they have a certain relationship.

The relationship between the two is that cost is the cost grouped by a certain object, and it is the objectized cost. In other words, production costs are targeted at a certain

Cost inventory cost

Inventory costs are the result of establishing inventory systems or taking operational measures. The cost of the inventory system mainly includes purchase cost, ordering cost, storage (storage) cost and out-of-stock cost.

(I) Purchase cost

Two meanings of purchase cost:

1. When an item is purchased from outside, the purchase cost refers to the product of the unit purchase price and the purchase quantity;

2. When items are manufactured in-house. The purchase cost refers to the product of the unit production cost and the production quantity.

Unit cost is always calculated as the cost when entering inventory. For out-of-shopping products, the unit cost includes the purchase price plus shipping costs. For self-made articles, the unit cost includes direct labor costs, direct materials costs, and enterprise management costs.

(2) Order costs (or order costs)

Order cost is the cost incurred when the item or raw material is obtained through procurement or other means from the confirmation of demand to the final arrival. Order costs include: filing an order application form, analyzing the source of supply, filling out a purchase order form, incoming inspection, and tracking orders.

It mainly includes the following factors:

1. Expenses of personnel in various internal departments, such as procurement, finance, raw material control and salary of warehouse management personnel;

2. Management costs. Such as office supplies, telephones, computer system applications.

Explanation:

The main feature of order cost is directly related to the number of purchases, and has nothing to do with the size of the order;

The average order cost of different companies varies greatly;

Determining the cost of ordering is not an easy task.

The total purchase cost can be divided by the annual order number to estimate the order cost.

(3) Cost of storage (storage)

Various costs incurred during the storage of items in the warehouse, including receipt, storage and handling costs.

1. Storage costs, that is, depreciation costs for heating, lighting, and storage buildings;

2. Staff costs:

3. The cost of keeping inventory records, that is, management and system expenses, including inventory and check inventory;

4. Security and insurance costs;

5. Costs of deterioration, damage and obsolescence of inventory items,

(IV) Out-of-stock cost

Out-of-stock costs are costs due to external or internal supply disruptions.

Big cost concept

The concept of large cost is a cost management concept established by an enterprise group according to the needs of cost management. It is not a new major discovery in theory. "Large" and "view" refer to a broad field of vision, not limited to the cost of cost, but to study cost as an economic category. The comprehensive analysis of costs using management economics is to break out of the narrow understanding of corporate costs and form the concept of "big cost" that matches the "big business". Effective cost control requires comprehensive and thorough implementation of a comprehensive budget management system, investment approval control in a responsible manner to the enterprise, centralized management and operation of funds, and accelerated capital turnover. Of course, the realization of the above goals requires follow-up mechanisms such as effective incentive mechanism, fairness and efficiency balance, in order to eliminate the adverse effects brought by the asymmetry of management information, prompt multiple parties to choose a cooperation model after repeated games, and ultimately maximize the overall corporate benefits.

content:

1. Production cost control. Due to the dependency of production costs and the uncontrollability of the group, this cost control was completed by the group's subsidiaries. The principles of "target-responsibility and profit center independent decision" and "group assessment" should be followed. The group only focuses on the formulation and evaluation of target costs. The formulation of the target cost should be scientific and reasonable. It must first have the overall target of the upper level and then the individual target of the subordinate. The evaluation of the target cost should respect the facts, not be balanced, strictly enforced, and correct in a timely manner.

2. Engineering cost control. It mainly refers to the control of the purchase cost of large-scale equipment in the group, the control of the leasing cost of the group's internal operating leasing company, the control of the cost of new project construction and the development of new products, and the control of the cost of rebuilding and expanding old products. Project cost control is to control the cost source in advance; the second is to carry out key control on the value of the large amount of incurred amount. The feasibility study report of the group's subsidiaries should be submitted first, and the enterprise group should make overall arrangements according to the overall plan, and review and approve in time.

3 Capital cost control. Various expenses paid by enterprises for obtaining and using funds, including capital occupation fees, fund raising fees, and comparative costs of capital dispatching and savings, are managed by the group. First, the group's monetary funds are opened in a unified and centralized manner, and the funds are allocated according to the cash expenditure plan. Second, the use of funds is cost-managed and interest is calculated at market rates.

4 Tax cost control. Tax calculation and payment are in principle managed by the group in principle. However, due to the on-site tax payment of taxes and fees and the possibility that the group's subsidiaries can operate across regions, it will bring certain difficulties to tax cost control. The group should try its best to Enterprises with regional boundaries implement centralized control (or fragmented concentration).

5. Capital operating cost control. Capital operation improves capital use efficiency through capital flow, combination, and optimized allocation. The group's capital operations mainly include corporate acquisitions and mergers, corporate restructuring, financial leasing, and capital expansion or contraction options. Due to the complexity of capital operation operations, group companies should establish special institutions and organizations that are responsible for daily decision-making and management of capital operations, or set up temporary organizations to operate in accordance with a specific capital operation method. Choice of capital investment.