What determines business cost?
Running a business is a complex endeavor, and costs can derive from a number of different business functions. Though sometimes expensive, neglecting to spend money on any of these functions can lead a business to an early grave.MaterialsCompanies are constantly balancing quality with affordability. For example, a glass bottle might look more attractive to consumers purchasing tea, but glass is far costlier than plastic. Parts or ingredients are also business costs: Herbs, sweetener and water are material costs for tea.Property, Plant and EquipmentThese costs, also known as PP&E, factor into a company’s bottom line. Be it a restaurant or factory, the cost of property must be considered. To manufacture a product requires a plant and equipment, like sewing machines or soda tab production machines.LaborSalaries and hourly wages must be paid to a company’s workers. As explained in the book, “The Labor Relations Process,” wages are such a large business cost that many companies outsource as
Costs are a top concern for a prospective or current business owners. Businesses encounter a broad range of costs, each with their own characteristics and potential effects. Effectively managing business costs can result in enhanced opportunities. Budgetary savings free up cash to invest in research and development, marketing or other growth strategies. It could also allow you to increase your payroll or offer more competitive pay, serving to help you retain employees and attract skilled applicants.
The cost depends on: 1) How much the business can operate on the fringe of the law 2) How little the business can get away paying its employees 3) How few benefits the company can offer to its employees while charging the maximum to customers 4) How long the business takes a temporary hit on profits to put others out of business 5) The amount of fines and penalties the business is willing to get hit with.
