What costs need to be considered in business decisions and what costs do not need to be considered

Business decision-making is the process of analyzing, researching and comparing the major issues related to the overall situation of the enterprise in order to achieve a certain goal in accordance with scientific procedures and methods, selecting one of the best solutions, and organizing and implementing them. These include:

1. Production decision-making. In order to ensure that the product is marketable. Achieve high quality, high yield, low consumption. Planning and deployment of product development, variety, output, quality, production technology, technological transformation, production equipment, raw material consumption, energy consumption, product packaging, etc.

2. Sales decision-making, in order to effectively occupy the market, expand sales, and achieve the most economical sales expenses.

The most goods sold, the pricing of products, sales channels.

The planning and deployment of sales methods, sales time and place, sales services, etc.

3. Personnel decision-making, in order to make full use of human resources and mobilize the enthusiasm of employees, plan and deploy labor organization, employee training, wages and benefits within the enterprise.

4. Financial decision-making, in order to effectively use funds, strengthen economic accounting, and make plans and deployments for the use, use, and management of funds. The necessary conditions for scientific business decision-making are: clear decision-making objectives; There are multiple options for decision-making; There are scientific methods to guide decision-making, and there are control means to implement decision-making.

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There are two main cost factors that are taken into account in the decision to prioritize production batches: the cost of adjusting the preparation and the cost of storage. As for the production costs such as direct materials and direct labor for manufacturing products, they have nothing to do with this decision and do not need to be considered.

Production decision-making refers to the decision-making made in the field of production on what to produce, how much to produce, and how to produce, including how to use the remaining production capacity, how to deal with loss-making products, whether the product is further processed and the determination of production batch.

Production decision-making is the process or function of determining the production direction, production target, production policy and production plan of the enterprise according to the business strategy plan of the enterprise and the situation of the internal and external business environment of the enterprise.

In the production decision, according to the characteristics of the product, the full cost factor needs to be considered.

Such as: material costs, labor, depreciation in manufacturing expenses, material consumption and other production costs, but also need to consider quality costs, logistics costs, sales costs, management costs, financial costs, design costs and many other factors.

Summary. Related cost is an important decision-making cost concept, in the process of business decision analysis, judging the relevant cost of each program can be carried out according to the following steps: (1) Summarize all the costs involved in each program.

2) Eliminate sunk costs and eliminate costs that are indistinguishable between options. (3) What is retained is the cost that is different between the schemes, that is, the related cost.

How should costs be distinguished in business decisions?

In the process of business decision-making, the relevant cost of each program can be judged according to the following steps: (1) Summarize all the costs involved in each program. 2) Eliminate sunk costs and eliminate costs that are indistinguishable between options.

(3) What is retained is the cost that is different between the schemes, that is, the related cost. Laughing.

Business decision-making needs to compare the economic benefits of different alternatives to choose the best solution, and cost is an important factor for decision-makers to consider, which is a key indicator to measure economic benefits. Loss.

The associated costs can help the decision to analyze the pros and cons of the alternatives, while the unrelated costs can interfere with the decision-maker's choice.

Common costs in decision-making. 1.Differential costDifferential cost is also called differential cost, which is divided into broad and narrow senses.

Differential costs in a broad sense are the difference between the expected costs between the alternative decision-making options; Differential cost in the narrow sense refers to the difference in cost due to the increase in output or the difference in resource utilization. 2.Marginal costFrom a mathematical point of view, marginal cost (MC) refers to the amount of change in cost when there is an infinitesimal change in output, which can be expressed by the first derivative of the cost function; From an economic point of view, marginal cost refers to the change in cost caused by a change in production by one unit.

Within a certain range of the rental chain, the differential cost of increasing or decreasing the output by one unit is the variable cost per unit of product, and the marginal cost, differential cost and unit variable empty cost are the same. 3.Opportunity costWhen making business decisions, the decision-maker will only select the optimal solution from the alternatives, and the other side-type plans will be abandoned, and the measurable value of the abandoned suboptimal solution is the opportunity cost of the decision.

Opportunity cost refers to the fact that when resources are scarce, resources cannot be used for one aspect at the same time. In other words, the use of resources in one area comes at the expense of their use in others. In the decision-making, the company chooses the most satisfactory solution and gives up the possible benefits of the second satisfactory plan.

This part of the benefit should be compensated by the chosen option, if the gain outweighs the loss.

The concept of cost in business decision-making is applied as follows:

The difference between economic cost and accounting cost is that the definition is different:

1. The economic cost is the economic cost of the project, which refers to the economic cost paid by the national economy for the construction and operation of a project, that is, all the material resources invested, including the cost of the first burden and the cost of private individuals.

2. Accounting costs refer to all the costs actually incurred by the enterprise in the course of operation.

The economic cost is the economic cost of the project, which refers to the economic cost paid by the national economy for the construction and operation of a project, that is, all the material resources invested, including the cost of the burden and the cost of private individuals. The economic cost generally includes the investment cost, the operating cost and the external deficit cost. The economic cost is relative to the financial cost.

Contact with Accounting Costs:

Organizational costs in an enterprise usually do not constitute a separate cost item, so they are not separately accounted for and analyzed. In fact, organizational cost occupies an extremely important position in the total cost composition of the enterprise, which is composed of explicit parts and implicit parts.

Among them, the salaries of management personnel and the operating expenses of the organization belong to the explicit part of the organizational cost, and if the efficiency of the organization is reduced due to the bloated organizational structure, it belongs to the hidden division of the organizational cost.

There are many manifestations of the hidden costs of enterprises. Such as the cost of influence, the cost of authority failure, the cost of information distortion, etc.

Since economic cost is broader and richer than accounting cost, we should not only consider accounting cost but also economic cost when making decisions.

The costs related to production and operation decisions include incremental costs, opportunity costs, and exclusive costs.

The right to make decisions on production and operation refers to the right of enterprises to make decisions on production and operation, produce products and provide services to the society on their own in accordance with the guidance of the national macro plan and market needs. The purpose of production and operation of socialist enterprises is to continuously meet social needs and pursue profit maximization.

The business system is to standardize the decision-making procedures for the major production and operation of Zhejiang China Commodity City Group Co., Ltd. (hereinafter referred to as "the company"), establish a systematic and perfect decision-making mechanism, ensure the scientific, standardized and transparent decision-making, and effectively prevent various risks.

This system is formulated in accordance with the provisions of laws, regulations and normative documents such as the Company Law of the People's Republic of China, the ** Law of the People's Republic of China, the Listing Rules of the Shanghai ** Stock Exchange (hereinafter referred to as the "Listing Rules") and the provisions of the Articles of Association.

Enterprise production and operation is a market-oriented, production-oriented, product-oriented business mode. The focus of an enterprise's production and operation is the supply and demand relationship of a specific market. Through the research and development of market demand and development trends, the company researches, develops, produces and sells its products and services.

The role of production and operation decision-making:

1. Correct business decision-making is an important guarantee for the prosperity of an enterprise. With the establishment and improvement of China's market economic system and the intensification of market competition, the relationship between enterprises and the external environment has become increasingly close, and the changes in the external environment, especially the market environment, have a direct impact on the survival and development of enterprises.

2. The correct decision-making is to mobilize the enthusiasm of the workers and realize the business objectives of the enterprise. Business decision-making determines the business objectives for the enterprise, and becomes the general goal of all activities of the enterprise and the common struggle of all employees. It unifies the thoughts and actions of the workers, gives full play to the enthusiasm and creativity of the workers, and makes suggestions and suggestions for the realization of the goal of breaking the problem of selling and dismantling the policy, and works together.

For example, marginal cost, opportunity cost, replacement cost, cash cost, avoidable cost, deferrable cost, specialized old cluster cost, differential cost, etc. are all related costs.

Conversely, costs that are not relevant to a particular decision and do not have to be considered in the analysis and evaluation are non-correlated costs.

For example, sunk costs, unavoidable costs, non-deferrable costs, and common costs are often non-correlated costs.