Hesham Saad Al-Sherbiny: The Manufacturing between Fixed,Variable and Societal cost

Arabian Steel Industries Technical Advisor

The cost can be exposed in the economic sense

“It is the sum of what an economic unit pays in terms of the value of materials, labor and indirect expenses for the production of a particular commodity. In other words, it is the price of the materials, wages and other expenses borne by the economic unit in the production of goods or services. “

Cost determinants can also be defined in three determinants:

First… What is the return or what is the benefit?

The cost is to pump an investment in exchange for a return (benefit) so it is necessary to achieve the benefit by measuring the value of the benefit (return) If the investment is made and the required benefit is achieved, this is considered an investment with a return … But if the required benefit is not achieved … In this case, the cost of investment is considered to be without return … Or simply it is considered a loss of time and money

Second… Who is responsible for it?

Hence, there must be a responsible for this loss … He must bear that loss whether it is towards the economic unit, or it is towards society and the environment

Third… What are cost economics

That is, the cost should be within sufficient limits to satisfy and achieve the targeted benefit, so that neither extravagance nor exclusion affects the achievement of the benefit as required without depriving other activities in need of these resources.

Fixed Cost…

It is the cost that the economic unit must perform, regardless of the amount of output as it must pay the same amount value, in other words it is a cost that does not change by changing production levels, for example rent is an example of a fixed cost, it must be paid by the economic unit regardless of the number of goods it manufactures and sells As well as salaries and insurance benefits ….

Variable Cost…

Variable costs, including the price of raw materials, distribution and labor associated with each unit of (product / service) that you sell, where variable costs increase or decrease according to the volume of production of the economic unit, where they increase as production increases and decrease with production decreases, including production consumables and commissions Distribution cost

Social Cost …

where the concept of social cost can be viewed by …. 2 frameworks …

1st Theoretical framework of the concept of social cost

From the point of view of society, where it is related to the costs borne by society from damages and sacrifices because of the practices of economic units for their various activities

2nd The environmental framework of the concept of social cost

From the point of view of the economic unit, where the concept of social cost can be viewed from the environmental point of view, which is the value of the costs necessary, whether to preserve the environment or to restore the environment to what it was before…

The environment can be defined as the natural environment in which living organisms live, and the environment is also defined as the vital elements that live-in human, including water, land, air, elements of the animal environment and elements of the plant environment.

It can be said that the social cost represents the depleted expenses borne by society alone because of the damages resulting from economic units… (Where she is responsible) … which results in environmental pollution … Where environmental pollution is defined as everything that leads directly or indirectly to damage to the efficiency of the vital process because of the negative and harmful impact on the safety of the various functions of all living organisms on earth, whether (humans – plants – animals) and thus leads to poor efficiency of resources and increase the costs of caring for them and protecting them from environmental pollution damage.

For example … the manufacturing of steel is one of the economic units with polluting outputs, whether it is air polluting emissions, especially carbon emissions, or solid waste polluting the earth … Thus, appropriate standards must be established to measure pollution and define a framework … (Returning the thing to its origin) … As a responsible framework… And the methodology that must be borne by economic units towards society and the environment

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