Enterprise costs

All spending on producing a product and bringing it to the consumer is called total outlay (general costs). They divide into production costs (raw materials, materials, fuel, energy, wages, depreciation) and distribution costs; among distribution costs, additional ones such as packing, transport and storage are added to the product value, while net distribution costs such as salespeople’s wages and advertising do not raise the product value and are covered out of profit. If a resource is brought in from outside for payment, an external (accounting) cost arises; if the entrepreneur’s own resource is used, an internal cost arises; no money is paid for an internal cost, and it is valued by the market price of a similar resource. By dependence on the volume of output, costs are fixed (rent, security, depreciation) and variable (raw materials, materials, piece-rate wages); total cost TC = FC + VC. Average cost per unit AC = TC / Q, average fixed cost AFC = FC / Q, average variable cost AVC = VC / Q and AC = AFC + AVC. Marginal cost MC = ΔTC / ΔQ is the extra spending for one more unit; it helps decide how much output it makes sense to produce.