Financial Education - Costs as the value sacrificed to acquire goods or service

Today I bring you a content about costs, those who follow my blog will have read that the cost is defined as the value sacrificed to acquire goods or services, which is measured in dollars by reducing assets or incurring liabilities at the time the benefits are obtained.

Now, goods or services are understood as items such as the acquisition of materials, manufacture of a product, the sale of the same, the provision of service, to obtain money, which allows you to finance, products, manage the company, train staff, among others.

In relation to the classification of costs, we have production costs, which are those generated during the process of transforming raw materials into a final product, indirect manufacturing costs, also known as manufacturing overhead, factory overhead or manufacturing expenses.

Indirect manufacturing costs are those costs that are involved in the process of transforming raw materials into a final product and are different from direct material and direct labor. As for direct cost, it is the one that is fully identified with an activity, department or product.

And finally we have the indirect cost, which is the one that cannot be identified with a specific activity. For example, the salary of the supervisor of the molding department. This is a direct cost for the molding department and indirect for the product, while the depreciation of the existing machinery in the finishing department, this cost is direct for the department and indirect for the product.