PRODUCTION, COSTS, AND PROFITS

Production, Costs, and Profits

Production, Costs, and Profits

The economic costs are the payments that the firm carries out supplier resources to divert these resources from the use of alternative industries. These payments, which the company is out of pocket, may be external and internal. In this regard we can speak of the external (overt or cash) and internal (implicit or implied) costs. External costs are the charges for resource providers who do not belong among the owners of the firm. For example, the wages of hired staff pay for raw materials, energy, materials and components provided by third party vendors, etc. The Company may use certain resources that belong to her. And here should refer to the internal costs. Internal costs - the costs of its own, self-used resource. Internal costs are cash payments that could be obtained for the entrepreneur's own resources with the best of all alternatives for their use. These are some of the income from which the entrepreneur has to give up, organizing their work. The entrepreneur does not receive these revenues, so as not to sell its resources and uses them to meet their needs (Amosweb, 2011). By creating your own business, the entrepreneur has to give up certain types of income. For example, the salary he would receive in the event of employment, if it had not worked on their own enterprise. Or from interest on the capital belongs to him, which he could receive credit in the field if not for the money invested in the business.

The amount of internal and external costs in the aggregate represents the economic cost. The concept of "economic costs" is a common, but in practice, the management of accounting at the enterprise, only the external costs are estimated to have another name - accounting costs. Since accounting is not considered internal costs, accounting (financial) gain will be the difference between gross income (revenue) company and its external costs, while economic profit - the difference between gross income (revenue) firm and its economic costs (the sum of both external and internal costs). It is clear that the magnitude of accounting profits will always exceed the economic return on the value of internal costs (Amosweb, 2011). Therefore, even if accounting profits (Financial instruments), the company cannot make profits in general economic or bear economic losses. The latter arise if gross income does not cover the full amount of costs the entrepreneur that is the economic costs.

Maquiladoras, plants in Mexico, where the processing takes place with cheap labor and labor-intensive methods, so some U.S. companies have both. The process of production in the United States complete with a capital-intensive methods. They send unfinished goods to maquiladoras. For example, many U.S. clothing manufacturers' produce fabric in factories in the United States, the large high-speed machines (Vargas, 2001). Then they send the cloth to Mexico, where the fashionable clothing is made by the workers using sewing machines. Another example is a plastic injection molding, which requires highly skilled workforce ...