Production is such an activity of man, as a result of which he satisfies his material needs. Since nature cannot provide him with all the necessary benefits in the right amount, he is forced to produce them. From this we can conclude that production is an objective necessity. Human needs are divided into spiritual and material, this is only an approximate division, but it very accurately reflects the social and natural needs of a person. Satisfying the spiritual principle of man is no less troublesome than material, nevertheless, they are also provided with the industrial power of modern production.
With the development of the standard of living , human needs also noticeably grow ; economic theory presents this trend as the law of exaltation of needs. As a result of the growth of human needs, production must constantly grow in order to provide a person with the necessary standard of living. The purpose of production is the complete satisfaction of the needs of human society, partly it is achieved due to the interactions of man and nature.
Each enterprise ultimately focuses on obtaining the highest possible profit, at the same time it is clear that not a single production of goods or services is without costs. The company incurs specific costs for the purchase of raw materials, payment for workers and advertising. At the same time, it seeks to launch a production process in which the necessary volume of production will be provided with minimal costs for the organization of this production.
Distinguish between variable and fixed costs. Variables include costs, the value of which varies depending on the volume of production. Such costs include payment for transport services, labor compensation, purchase of raw materials, fuel and additional materials. Variable and fixed costs in total form the total costs, which largely determine the profitability of this production.
In order to ensure the necessary level of production, the company must implement a number of costs. Depending on the change in the volume of these costs, the volume of output changes. Some volumes of expenses are subject to fairly quick adjustments, while others require additional time to resolve this issue. Costs, the regulation of which requires a large amount of time, determine the size and parameters of the production capacity of the company and are called fixed costs.
Fixed costs - these are the costs of using production factors, while the costs determine the consumption of resources in their natural form, while the costs represent the cost of the costs incurred. Within an individual enterprise or firm, fixed costs include individual production costs, which are the costs of a particular entity, and social costs, which are aimed at producing the volume of a product.
Given the above facts, we can conclude that in a market economy, costs can and should be managed. Economic thinking reaches a completely new logical level, which means that variable and fixed costs are subject to fundamental change, which will require the need to create new theories, as well as completely new professional training for employees. All these changes will be required for progressive innovative production management, which will inevitably lead to a significant improvement in the well-being of human life.