SLC | S21W6 | Costos para emprendedores - Estructura de costos.

Hello my steemian friends,

This is my participation in the contest” SLC | S21W6 | Costos para emprendedores - Estructura de costos organised by @yolvijrmin #costs-s21w6

What is cost structure and what is its importance to business?

Cost structure is a management part that covers all the expenses incurred to run the business, and it is an important part of the business plan. It can help us cut costs and improve profitability:

Cost structure helps us understand how our money is to be spent on day-to-day expenses and the work necessary for our business.

By considering the cost structure, we can pay attention to the things where we can reduce expenses.

And in this way we can reduce our costs efficiently, invest more for manufacturing and increase the demand for our products and services.

Cost structure is a part of the business plan, because it gives us an idea in advance what our business will demand.

Cost structure includes all expenses from raw materials and employee salaries, rent, electricity expenses, transportation, commissions, professional fees to marketing, administrative expenses. The costs of our small, medium or large business can be fixed or variable,

Provide examples of businesses that use the cost structure methods explained; be logical in your answers.

Walmart, McDonald's, BigBasket, Dominos, Indigo, Green Rage etc. ::

Clothing retailers like Green Rage calculate their costs to determine the lowest possible price for their clothes. Green Rage calculates fixed costs like rent, electricity and staff salaries as well as variable costs like sales commission. And by selling their goods at cheaper prices, they earn more profit. That is why it is said that low profit and high sales are always profitable.

All these companies use a cost-driven structure, which includes using outsourcing to keep internal costs low. This gives them the freedom to set competitive pricing.

These airline companies attract their customers by giving high discounts on advance bookings made 2-3 months in advance for long-distance journeys, which helps them get more bookings and increase profits.

The above companies, by cutting down their expenses, supply quality products to the customers at reasonable rates, due to which their sales increase unlimitedly and they earn profits.

What are the elements of cost structure? Provide examples,

Fixed Costs: These costs are the fixed expenses of our business that do not change with the production volume. Examples include rent, electricity expenses, bank interest, etc.

Variable Costs: These costs vary depending on our production volume. These include raw materials, sales commissions and packaging, etc.

Material Costs: These costs include expenses on raw materials, manufacturing supplies. Transportation to the mall is also included in material costs.

Labor Costs: These costs include wages and salaries, travel expenses.

Overhead Costs: These include expenses such as rent, office supplies and administrative expenses.

Indirect Costs: These are expenses that are not previously estimated, such as wear and tear, machine breakdowns and employee benefits.

Draw the cost structure of a business dedicated to making cakes. It has a production of 5 cakes per day and expects to achieve an overall profit margin of 25%.

Now if I have to make my budget, proposal for making only 5 cakes per day, then the pre-estimated expenses in it will be as follows.

Fixed cost: Since this expense includes house/shop rent, so for making only 5 cakes, I will not need to take any rented building, I will start with a part of my house, but I include the increased electricity bill in it, which will increase by about $50 or $60.

Variable cost: Now since we have made only 5 cakes, we will have to collect and store at least 3-4 days worth of goods, but this quantity is also not much but the cost of our product will increase a little, to make 5 cakes of about 2 kg each, we will get all the necessary ingredients for about $75.

Material cost: The transportation cost of these finished cakes to get the ingredients from the market and to reach the customers will be about $30.

Labor cost: If we assume the monthly labor of one employee in its production to be $150 per month.

Overhead cost: If we include additional expenses in these, then only $60 will be spent monthly.

Indirect cost: I do not expect any indirect expenses in such a small scale business.

And in this way I can determine the price of one cake as follows:

Electricity bill: $2 per day divided by 5 cakes = $. 4

Raw material : $ 15 per cake

Transportation/packing charges : $6 divided by 5 cakes = $1.2

Labour charges : $5 divided by 5 cakes = $1

Overhead charges : $2 divided by 5 cakes = $.4

Total Manufacturing cost of one cake $ 18 Its cost in Indian Rupees is approximately Rs. 1500

If we take 25% profit on the manufacturing cost then its cost will be approximately $ 22.5 [1865 Rupees]

whereas we can very easily sell it in the market for $ 24 [2000 Indian Rupees]. Because in the market such cakes are available for up to $ 30.

I also want to invite here
@josepha , @dove11 @paholags, @malikusman1,

Thanks for reading my post, I pray to God for the progress and happy future of all Steemians.

Sur-riti❤️
INDIA,