What are true costs?
True costs include all direct and indirect costs associated with the manufacture of a product. These include material costs, labor costs, energy costs, transport costs and environmental costs.
Components of true costs:
Material costs: costs of raw materials and components that go into the manufacture of the product.
Labor costs: Wages and salaries of employees involved in production.
Energy costs: Costs for energy required to manufacture the product.
Transportation costs: Costs for the transportation of raw materials and finished products.
Environmental costs: Costs arising from environmental impacts such as emissions and waste disposal.
Advantages of determining true costs:
Complete cost analysis: Includes all relevant costs to provide an accurate picture of manufacturing costs.
Informed decisions: Helps companies make informed pricing and cost reduction decisions.
Sustainability: Considers environmental costs to promote more sustainable production practices.
Competitiveness: Accurate cost analysis enables companies to set competitive prices and improve profitability.
Conclusion: Determining true costs is crucial for a comprehensive cost analysis and optimization of production processes. This enables companies to make informed decisions on pricing and cost reduction and increase their competitiveness and sustainability.
