Value Added, Production Costs, and Company Profitability
Value Added
Value Added is the difference between the value of goods produced and the cost of raw materials used for production.
Benefit of the Company
Benefit of the company: By selling the finished goods produced, the company obtains revenues. The difference between revenues and production costs is the company's profit.
Objectives of the Company
- Growth and market power in February.
- Stability and adaptability to the environment.
- Social nature.
Production Cycle
The company buys raw materials from its suppliers, which are stored and then go to manufacturing. Once processed, they leave the production area as finished products. These products are stored until they go out for sale and are purchased by customers who pay for them.
Components of the Enterprise
- Internal human group
- Heritage (April)
- Environment organization
Technical Efficiency
Technical efficiency occurs when you achieve the maximum production with a given set of resources.
Economic Efficiency
Economic efficiency occurs when you achieve maximum production at minimum cost.
Cost of Production
The cost of production is the sum of all costs: raw materials, machinery, equipment, water, energy, insurance, etc.
Fixed Costs
Fixed costs must be assumed regardless of production volume; therefore, they are considered fixed (rental of machinery, depreciation, fixed labor).
Variable Costs
Variable costs change with production and are higher the greater the quantity produced.
Value Added
Value Added is the difference between the value of goods produced and the cost of raw materials used for production.
Benefit of the Company
Benefit of the company: By selling the finished goods produced, the company obtains revenues. The difference between revenues and production costs is the company's profit.
Objectives of the Company
- Growth and market power in February.
- Stability and adaptability to the environment.
- Social nature.
Production Cycle
The company buys raw materials from its suppliers, which are stored and then go to manufacturing. Once processed, they leave the production area as finished products. These products are stored until they leave for sale and are purchased by customers who pay for them.
Components of the Enterprise
- Internal human group
- Heritage (April)
- Environment organization
Technical Efficiency
Technical efficiency occurs when you achieve the maximum production with a given set of resources.
Economic Efficiency
Economic efficiency occurs when you achieve maximum production at minimum cost.
Cost of Production
The cost of production is the sum of all costs: raw materials, machinery, equipment, water, energy, insurance, etc.
Fixed Costs
Fixed costs must be assumed regardless of production volume; therefore, they are considered fixed (rental of machinery, depreciation, fixed labor).
Variable Costs
Variable costs change with production and are higher the greater the quantity produced.