cost of production

Definition

The costs related to making or acquiring goods and services that directly generates revenue for a firm. It comprises of direct costs and indirect costs. Direct costs are those that are traceable to the creation of a product and include costs for materials and labor whereas indirect costs refer to those costs that cannot be traced to the product such as overhead.

Use cost of production in a sentence

  • The cost of production for bringing a new product to shelves is often so much that the decision must be highly considered to wage whether it has a payback time that is worth the wait.

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  • The company went bankrupt because rent, utilities, supplies and the high cost of production in general made their product too expensive for the average consumer.

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  • We try to save money in places that we can but we must also be able to lower the cost of production when making changes in the workplace.

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