Cost reduction factors

Let's touch on the topic of market economy. So, in economic conditions, the importance and role of lowering the cost of goods increases, as this will allow:

  1. To significantly increase the size of profits that remain at the disposal of enterprises, and create opportunities for expanded production.
  2. Increase the wages of employees and thereby give an incentive to work. Improve the solution of social problems.
  3. To improve the material condition of enterprises.
  4. Reduce the pricing policy of products, improve competitiveness.
  5. Raise rates in joint stock companies and create large dividend payments.

Types of factors

Cost reduction factors can be safely divided into:

  • internal,
  • non-manufacturing.

Intra-production factors include those that the production has the ability to influence in the management process. This concerns the improvement of the organization of production, the motivation for a high level of production, the application of new technologies and so on.

Non-production factors include those that, in the production process, the company has no effect. These include prices for the purchase of raw materials, tariffs for electricity and fuel, rates of deductions and taxes, also natural conditions, etc.

Considering the factors affecting the cost reduction, it is impossible not to mention that the cost of agricultural products has risen markedly over the past ten years. This was due to the increase in prices for industrial goods that went into agriculture, an increase in the production capacity fund and the inefficient use of production resources. The number of reported cases of waste and mismanagement also increased.

Cost reduction structure

In order to find reserves to reduce the cost of goods, you need to know the cost structure or the share of some elements. Such a structure tends to change, this involves such factors of cost reduction as:

Special conditions for the production of certain products. Here you can mark several industries:

  • laborious.The cost price reflects a high level of labor costs.
  • material-intensive. In that case, if a high level of material costs.
  • capital-intensive. In the case of a very high proportion of depreciation.
  • energy intensive. If it was spent a large amount of energy and fuel.
  • Accelerating the growth of technical and scientific progress. With regard to this factor, it affects the structure is very multifaceted. This significantly reduces the cost of living labor.
  • The level of specialization, concentration and co-production processes.
  • The place where the company is located.
  • The rate of inflation, change in rates on a bank loan.

The structure of the cost of certain products is characterized by some indicators.

  1. The ratio between materialized and living labor.
  2. Articles in the total amount spent on finance or a fraction of the individual elements.
  3. The ratio between variable and fixed costs, indirect and direct, overhead and major, commercial and manufacturing, etc.

After analyzing the cost structure, it is possible to draw certain conclusions about the main reserves for its reduction.First of all, this is a significant savings in expenditure and main elements.

As for the processing and agricultural enterprises, there is a significant place occupied by costs that are associated with the management and organization of production. They need a drop. This is carried out through the elimination of some staff units in the apparatus of the economy. Thereby, management methods and structure will be improved.

Many factors affect the cost reduction. One of the most important is the increased level of yields of various crops grown by agriculture, the economy of many types of resources that are used in production.

The cost of some work is completely independent of productivity and yield. For example, harrowing, plowing, sowing, caring for animals, etc. The higher these indicators are, the lower the cost of a certain unit of production will be.

If livestock productivity declines in livestock, feed consumption per unit of production will immediately increase. And the growth of animal productivity should be achieved, in turn, due to a balanced and complete feeding, proper care.

Ways to increase yield

Let's simultaneously analyze how it is possible to increase the level of crop yields. It is possible:

  • with proper tillage,
  • when using hybrids and other varieties with high yields,
  • when using mineral fertilizers,
  • pest control.

How to reduce costs

All of the above factors for increasing the yield and productivity of animals, should be considered directly as factors reducing cost. All production costs can be reduced with more economical use of cash. Includes fuel, seed, feed, fertilizer. For example, due to lack of conditioning, in practice, they often overestimate the seeding rate. As a consequence, a significant portion of the crop does not reach.

As for livestock, there you can reduce costs by improving the structure, and you can also remove and sell excess equipment and machinery. It is necessary to build new, economical premises, to increase the seasonal, daily and shift production of technical equipment.

After reading the information provided in this article, we can draw certain conclusions.

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