3 Cost Terms in the Business World that Beginners Must Understand

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Timebusinesstoday.com – In business, not only experience or knowledge in the field, but insight into theoretical fundamentals is also needed, you know.

Insight into concepts can be important for Kawan Puan in running a business, especially important concepts related to costs or capital.

The following are three terms regarding costs in the business world that you must understand, as reported by optionalnetizen.id.

1. Opportunity Cost (Opportunity Cost)

This term refers to the cost value which helps Kawan Puan in allocating cost resources to be efficient.

Opportunity costs also focus on the highest value of other alternatives so Kawan Puan must be smart in choosing.

For example, an entrepreneur will have a choice of other business opportunity costs from the business he is running.

2. Marginal Cost (Marginal Cost)

Marginal costs are the term for the costs that Kawan Puan must incur to produce the other business units needed.

This situation usually occurs when a business needs supplies when deciding to increase production.

These additional costs usually include labor costs, costs for materials, and so on.

3. Economies of Scale

This term refers to the situation when the average cost per unit decreases as the amount of production increases.

You need to know that large quantities of production will very likely increase the fixed costs that have been allocated.

Using economies of scale, Kawan Puan can overcome this starting by reducing costs per unit.

With economies of scale, Kawan Puan can also consider the cost efficiency of the goods sold so that they are able to compete in the market.

Economies of scale that prioritize economic costs mean that as a startup, it will be difficult to compete against large companies that have achieved large economies of scale.

The theory of the terms above will be a useful initial provision for Kawan Puan in understanding the world of business.

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