XII. Read Text A «Cost»

Text A. Cost

Price is always being formed from cost and profit. What do these economic categories mean? Let us examine them separately.

Cost is the monetary expression of the expenditure incurred by an enterprise in the process of the production of a product – a commodity or a service. Since the cost is included in the price of the product goods, when the goods are sold the enterprise is compensated for its expenditure and this acquires the material means to continue production.

Cost is determined by the value of the materials used plus expenditure on equipment, power, wages, and so on. But it also depends in large measure on the efficiency and quality of the work of the enterprise as a whole. The better the performance the lower the cost, and vice versa. And since prices remain constant (the state sees to this), profit, and hence the economic incentive fund, i.e., the part of the income that accrues to the personnel in the form of bonuses and various other payments and benefits, will be proportional to production costs.

How can the cost be lowered? Production costs can be reduced primarily through the economic use of raw materials, fuel and energy, better utilization of fixed capital and higher productivity. That is why strict cost accounting is profitable both to the individual work collective and to the society as a whole.

XIII. Find the passage where the following ideas are discussed:

1. о компенсации предприятия за его расходы;

2. чем определяется стоимость;

3. что собой представляет фонд материального стимулирования;

4. посредством чего можно снизить стоимость товара.