DICTIONARY

Cost of production refers to the total sum of money needed for the production of a particular quantity of
output. As defined by Gulhrie and Wallace, “In Economics, cost of production features a
special meaning. ... It signifies the money costs which are to be incurred for acquisition of the factors
of production.”

What Are Production Costs?

Production costs refer to the costs incurred by a business from manufacturing a product or providing a
service. Production costs can include a variety of expenses, such as labor, raw materials, consumable
manufacturing supplies, and general overhead. Taxes levied by the government or royalties owed
by natural resource-extraction companies also are treated as production costs.

Understanding Production Costs

For an expense to qualify as a production cost it must be directly connected to generating revenue for the
company. Manufacturers carry production costs related to the raw materials and labor needed to create the
product. Service industries carry production costs related to the labor required to implement the service and
any materials costs involved in delivering the service.

Production incurs both direct costs and indirect costs. Direct costs for manufacturing an automobile, for
example, would be materials like plastic and metal, as well as workers' salaries. Indirect costs would include
overhead such as rent, administrative salaries, and utility expenses.

Cost Structure
Therefore, a decrease in producers' costs will increase the supply. Conversely, if production costs
increase, the quantity supplied at a given price will decrease. Higher costs mean that
producers will have to produce less to be able sell a product at a given price.

When cost of production goes up, it costs the business more to make the item/product. This affects the cost
price which is responsible for changing the supply (note: not quantity supplied). Increased cost of production
shifts the supply curve to the left side (this is called decrease in supply). Due to the shift in supply curve to
the left, the equilibrium price (note: not the selling price) goes up and equilibrium quantity (note: not quantity
demanded) decreases.

cal·i·bra·tion
1. the action or process of calibrating an instrument or experimental readings.
"the measuring devices require calibration"
o each of a set of graduations on an instrument.
To be confident in the results being measured there is an ongoing need to maintain the calibration of
equipment throughout its lifetime for reliable, accurate and repeatable measurements. The goal
of calibration is to minimise any measurement uncertainty by ensuring the accuracy of test equipment.

Internal product audit

The product audit is the assessment of the final product/service and its qualification for use evaluated
versus the intent of the purpose of the product/service. It ensures a thorough inspection of a final product
before delivery to a supplier or a customer. By thoroughly inspecting the final product, it aims at improving
quality, increasing profitability, and enhancing customer satisfaction and loyalty. It is necessary for a product
to go through this process in order to determine if it meets specifications. The Product Audit ultimately
serves as a benefit to the suppliers and customers by ensuring quality which results in higher customer
satisfaction.

example:

Companies, government agencies and nonprofit organizations use auditing practices to manage
compliance with internal controls. For example, an auditor looks for inconsistencies in financial records.
Audit reports help an organization demonstrate accountability to internal and external stakeholders.

Strategic quality planning (SQP) is a systematic approach to defining long-term business goals, including
goals to improve quality and the means (i.e., the plans) to achieve them. Many organizations have created
a vision “to be the best,” toward a goal of outperforming competitors.

Cost reduction is the process used by companies to reduce their costs and increase their profits. Depending
on a company’s services or product, the strategies can vary. Every decision in the product development
process affects cost. Companies typically launch a new product without focusing too much on cost.

Cost Reduction can be understood as the perennial decrease in the unit cost of goods produced and
services provided by the company, without compromising with its quality and suitability for the use intended,
with the help of new and improved methods.

In this process, the essential features and quality of the product are kept intact and is limited to the constant
savings in the cost of production, administration, selling and distribution. The basic purpose is to lower
down the cost occurring at the time of production, storing, selling etc.

EXPENDITURE gasto

Payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement
of an obligation as evidenced by an invoice, receipt, voucher, or other such document

An expenditure represents a payment with either cash or credit to purchase goods or services. An
expenditure is recorded at a single point in time (the time of purchase), compared to an expenseAccrued
ExpensesAccrued expenses are expenses that are recognized even though cash has not been paid. These
expenses are usually paired up against revenue via the the matching principle from GAAP (generally
accepted accounting principles). For those who are unaware of the matching principle which is allocated or
accrued over a period of time. This guide will review the different types of expenditures used in accounting
and finance.

Progressive

happening or developing gradually or in stages; proceeding step by step.

favoring or advocating progress, change, improvement, or reform, as opposed to wishing to maintain things
as they are, especially in political matters
Streamline

To improve the efficiency of a process, business or organization by simplifying or eliminating unnecessary

steps, using modernizing techniques, or taking other approaches.

A streamlined process means fewer errors and delays. You probably use dozens of business processes
every day. For example, you may go through the same steps each time you generate a report, resolve a
customer complaint, contact a new client, or manufacture a new product.

effiecincy

Efficiency is about making the best possible use of resources. Efficient firms maximise outputs from given
inputs, and so minimise their costs. By improving efficiency a business can reduce its costs and improve
its competitiveness.

Efficiency requires reducing the number of unnecessary resources used to produce a given output
including personal time and energy.

Gradual unti-unti – taking place or progressing slowly or by degrees.

Hidden costs. Expenses that are not normally included in the purchase price for a piece of
equipment or machine e.g. maintenance, supplies, training, support and upgrades.