Production Costs: Where Less Is More
In This Chapter
Understanding that everything has a cost
Recognizing different types of costs
Figuring out which costs to ignore
Examining the relationship between costs and output
Changing cost over time
Production requires costs, and obviously you want to keep those costs as low as possible. Lower costs mean more profit, and profit is ultimately your goal. Before examining the various types of costs, recognize every cost associated with production. Costs that are often ignored include the cost of the business owner’s time and the money the owner has invested in the business.
In addition, recognize that not all costs are the same. Some costs can be changed very quickly, while other costs can’t be changed for a long time. Some costs factor into business decision-making, while other costs are ignored. Thus, you need a clear understanding of costs before you’re able to maximize profit.
Because your ultimate goal is to produce the profit-maximizing ...