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Am super happy to finally make an entry into this contest. I've been trying to do this all day but one thing or the other has been stopping me but it's all good now that I could make it. The topic before us is such an interesting and engaging one and most importantly, we get to learn from experts like @ . Thank you for putting up this lesson. Below is entry, I hope you find it interesting.

What is cost and how important is it for entrepreneurs?

Cost can be defined as the totally of amount or resource used in creating a valuable product or services. My emphasis on valuable product because it's expedient that anything you're spending on should be something that have value and can as well generate returns to cover for the cost and expense and also leave you with reasonable amount of profit as a business man or an entrepreneur.

This cost can also include remuneration for workers if it a firm big enough to accommodate workers, purchases expenses to support the free flow of the business. Cost factor in business also help informs what the price of our product or services would be.

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The importance of cost cannot be overemphasized as it helps in the continuity of a business and ensure that resources are not pumped into business unnecessarily. It can also help point out areas of the business that needs attention in terms of more input or extraction of extra input as the case may be. In other words you can make Informed decision with a good costing technique.

Establish the difference between costs and expenses, giving examples of this through a real case.

If you're deep into business or you studied it the formal way, you would understand that there is a clear difference between this two terms. There are cost that is directly associated with production. We call them Direct cost, these are cost that you really cannot do without, they serve as the basis for that production and many at times there are no short cut to them

We have another cost referred to indirect cost. These are cost that are not directly related to the production of your goods or service but they come in to facilitate the business activities and these indirect cost can be referred to as Expenses.

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They are the extras you put in to ensure that the business run smoothly and this varies from one business to the other.
For example if am to run an Ice block business which I've done before, I need the following

• Cooling chest or an industrial freezer
• A space/site for the freezer
• Outright buy/ Annual rental fee.
• Logistic/Transportation
• Nylon for packaging the ice
• Water

From the above, your direct cost which is paramount to the production of ice block are Freezer/cooling chests, A site/space for the freezer in a commercial environment,annual rental fees for the business of rented, and then finally water and Nylon.

While the expenses would be monthly remuneration for workers with you and of course you still have to pay for transportation to customers far from you. These are the extras expenses associated with the business to allow a smooth flow and running of the business.

What are the benefits of performing a good cost determination?

The benefit of performing a very good costing for business are quite numerous nevertheless, I would like to mention the following below which I think stands out among many other benefits.

• Planning: Cost helps us in planning our business or enterprise well just as the case my be. When you know the cost involved in making a product or rendering a service, you would be able to plan adequately that the business activities do not get stuck or stranded along the line.

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• Informed Decision Making: Costing help us make informed decision. Back in my undergraduate days, I took a particular course called cost Accounting. It was a whole lot of exposure for me as various costing technique and factors were revealed.

One can tell which part of the business is not doing well, one can tell which aspect of the business should be prioritize and one can equally tell which aspect needs more input for better return.

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• Determination of Price: with proper costing technique in place you would be able to arrive at the price you are willing to sell out your product or render your services. The fact is without proper costing, you would fix a price that would reck the business and of course this is not the goal of any well meaning entrepreneur or business owner.

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• Long Term Drive: With proper costing or cost accounting in place, one can be sure that the business would thrive over a long period of time because you know exactly what the business needs to thrive having taken this aspect seriously.

Many businesses ran bankrupt because they failed to take note of this aspect of the business...pumping in unnecessary resources and money and still have no result because they weren't careful with their cost. The fact is that, costing is not about pumping in money but managing and accounting for everything that goes into the business activities.

How do you determine the costs of your business? If you are not an entrepreneur, how would you do it?

Well if am not an entrepreneur there would still be a way out even if I do not learn how to operate a business formerly. The very first thing I should take note of is the amount that make up the product or services I render. By the time I am able to clearly itemize all of these, I have been able to spell out my cost.

I won't also stop there, I would also do well to itemize the expenses around my production activities..bearing in mind that my expenses are not what actually directly generate the profit but a fraction of the unrealized profit that would go into the smooth running of the business.

That means the real inputs that would bring in return is that cost that is directly associated with the production of the business. For example if am to purchase that land for the ice block business, I might not get an immediate gain...

But over the years, say 5 years, I would break even and make crazy amount of money because rent is out of the picture and the land now belongs to me, I could even pick a closely related line of business such as frozen food, on that same landed property and increase my profit and turnover annually.

Bottom Line

Determining cost in business will go a long way in determining the success of that business. Running a business carelessly without ascertaining how much goes in and out and the rate of return on every input, the business will definitely crash and that might ultimately push such person out of that line of business. From this we can tell that the need for costing cannot be overemphasized.

Sigh! I think I will like to drop my pen here, thanks for your time and attention. I hope you found this piece of mine interesting. Just before I go, let me invite @josepha @m-fdo @radlekihg to this contest. Gracias!

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Regards
@lhorgic❤️

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