Chapter 6   Costs Categories

This chapter from ‘Business Economics VI Groundbreaking’ distinguishes the following cost types or categories of costs:

  • Costs of LABOR
  • Costs of RAW MATERIALS and AUXILIARY MATERIALS in general, various MATERIALS
  • Costs of MONEY

As far as the costs of labor are concerned, no one alone determines that. The employer and employee must agree on this between themselves. Costs of various materials: a U.S.-dollar that is saved on the cost of purchasing is usually worth more than the U.S.-dollar that is won with great difficulty in sales. Sales remain important, but purchasing also.

About SEMI-FINISHED PRODUCTS vs. GOODS IN PROCESS an example is given, concluded with the moral of this story:

DO less and EARN more

Not working HARD, but working SMART

Initially we found the economic life cycle of a machine together with the corresponding minimum X (the cost price compensation due to that machine) assuming a known book value, the new price of the machine at the beginning. A machine is nothing else than a stack of working-units. It is in fact a “translation” of that B0 in the price c.q. the value per working-unit. It is a precise translation of one in the other or the reverse. If, conversely, the value per working-unit is known (that value can change at any moment) and also how many working-units may still be expected (one can think differently about these data at different moments) then that information can be translated into the current book value of the machine.

Chapter 6 ends with APPENDIX ‘Economic Life Cycle_NEW Algorithm’. The control calculation shows that determination of the NPV of the cash flows at sales price s identical to SUC (Standard Unit Cost), then the NPV is negative! The old calculation of the economic life cycle has to be superseded by this NEW algorithm.

Chapter 6 is the end of PART 1 ‘INVESTMENTS and COSTS’ of ‘Business Economics VI Groundbreaking’. About starting a business, investing and making costs.

This book harshly criticizes out-of-date Business Economics textbooks.

You are very poorly trained in business economics even at Business Schools that ignore ‘Business Economics VI Groundbreaking’.

A self-study book, hardly needing a teacher. Necessary also for many managers in companies to improve their own performance.

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