I'm glad to participate in this challenge, when we talk about cost for entrepreneurs I know how important it is , in this post I would like to expansiate deeper using the homework questions.
What is cost and how important is it for entrepreneurs?
Cost in my own understanding is amount spent to purchase or acquire something. For instance if I pay 100 Steem to transport myself and my good from one destination to another I would record the amount spent as my cost. That's to say the 100 Steem spent is my cost.
Cost is very important to an entrepreneur because it will help you to track your income,gain and losses in the business. Knowing the cost in business help the entrepreneur to set his selling price appropriately. It will help to track the growth of the business.
Establish the difference between costs and expenses, giving examples of this through a real case.
Cost like I said is the amount spent in buying things while expenses is the money spent to do something or buy something.
| Cost | Expenses |
|---|---|
| The money I spent in order to buy biscuit that I want to sell in my shop is Cost | while the money I paid for someone to help me offload the biscuits from truck is Expenses |
| If I pay for my shop is part of the cost in my business | while the money I pay people that will work for me is an expenses |
| I booked flight to Lagos for business meeting I paid 500steem is cost | if I should buy shoes from the airport is expenses |
What are the benefits of performing a good cost determination?
There are lots of benefits in performing a good cost. I can remember when I started my business new I wasn't taking records of my cash flow all I know is there's money. Untill the business started dieing off I realized the need to take good cost in my business and I saw improvement. To that effect I will list the following as the benefits.
Good pricing. Performing a good cost will help the entrepreneur determine a comparable price that will yield good profits that covers the cost.
Sustainability of business. When an entrepreneur analyzes the cost, knowing when to spend, how to fix the price on goods it helps the business to stay the test of time.
Growth. Costing helps an entrepreneur to know the business and how to keep it on track.
A good costing enables an entrepreneur to spend wisely in order not to cross the capital.
How do you determine the costs of your business? If you are not an entrepreneur, how would you do it?
I'm into provisions and foodstuffs determining the cost of business I will do as follows:
- Taking stock of my commodity that I have in my shop, since I have already known my investment capital this will give me an idea of the amount of my assets.
- Putting all my expenses together to help me know the rate I should give to each of the items so as to get the simple interest and also consider the time of which I can sale out the commodities available. What this means is to calculate my Principal (P) x Time (T) x Rate (R)
S = P x T x R ÷100
Now to determine the actual amount, I need to calculate the Interest + Principal
Amount = Principal + Interest = P + I
The simple formula for simple Interest above will give me the cost of my business even as a non entrepreneur .
The benefits of costing in business can not be overemphasized , that's what keeps the business going .
I want to invite my friends @harferri @wilmer1988 @yonaikerurso to join this contest.
Greetings @okere-blessing
1.- You talk about cost as "the amount spent to buy or acquire something!" However, it must be seen as an investment, since it is everything that is used in the production of a good or the provision of a service.
2.- You have explained to us some differences between costs and expenses. Costs are everything that is used in the production of a product, while expenses are payments made for aspects that are not directly related to production.
Salary expenses are expenses as long as they are not linked to the production process or the provision of services.
3.- You have shared with us the importance of costs for the profitability of a business, and how good management of them can help to have a solid business.
4.- You have explained to us some aspects for calculating the cost of the goods that you offer in your business. It is important to keep in mind that for the cost of production, aspects such as labor, raw materials, among others, must be included.
Thanks for joining the contest
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Upvoted! Thank you for supporting witness @jswit.
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Cost and expenses are two words that are often confusing which you have break them down in your post. Indeed entrepreneurs value the two. I wish you success.
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Greetings my friend,
You’ve explained the concepts of cost and expenses very well. The distinction you made between cost and expenses is really clear. The money spent on buying the biscuits is indeed a cost, while paying someone to help offload them is an expense. It’s the same with your flight and the shoes; costs are related to acquiring what you need for your business, while expenses are for additional services or items that support your operations. Understanding this difference can really help in managing your finances effectively. Good luck.
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Thank you very much for your feedback. Of course the lesson is helpful.
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