Influence of the increase in the cost of materials in business decision making.

in hive-175254 •  2 months ago 

Greetings to all the readers of this great platform, in general there are multiple factors that affect the companies and that force to change the decisions that they must be taking, this with the purpose that the company is adapting to the constant changes that are generated in the current economy, to manage to conform like a solid company in the market, and that lasts in the time, always obtaining the greater profitability at the time of carrying out its economic activity.

The image used is from Public Domain, Author: Mahameh Hassan, 2021

Companies dedicated to the transformation of raw materials require a constant analysis of the management of the costs incurred in their production processes, since they are constantly faced with various situations that directly affect the operation of the company.

In this sense, the macroeconomic variables that affect the country, such as the exchange rate and the frequent salary increases, among others, have intensified the devaluation of the national currency, resulting in the increase of the prices of goods and services, causing a high inflationary level, which is caused by the low national production and therefore the shortage of goods and products.

Regarding the above, Farias, (2017) states that "In recent years the Venezuelan has evidenced, the effects of the impact that inflation produces in his patrimony; on the one hand the businessman observes how the return on his investment decreases, becoming increasingly difficult the recovery of his capital; while the majority of the population, who receives a fixed income, feels how every day is poorer, because what he receives in cash, as time goes by, serves him less to satisfy his primary needs".

The image used is from Public Domain, Author: David Schwarzenberg, 2017

The information obtained by management about the costs and expenses incurred by the company lacks reliability in an inflationary economy, since the constant growth of the inflationary index has a negative impact on the profitability of organizations. In addition to the fact that, most of the time, the accounting of production costs is neglected or poorly implemented, because many companies do not know how much it costs to manufacture a product, provide a service or develop a project.

In view of such statements, Mendoza. (2012), explains that in "Small and medium-sized companies, inconsistent costs are observed, as well as the absence or inadequate implementation of cost control and management techniques".

The accounting of production costs is a technique used for the use of available resources in any economic process, and knowing it facilitates the effect of the decisions that are presented in relation to already established programs and the assurance of a correct planning and use of material and human resources that the entity has.

All the images used by the Author @Chucho27 are Public Domain, in each one of them you can find the source of the image.

The image of the Banner at the bottom, is in the public domain obtained from: PixaBay

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Greetings @chucho27, certainly cost accounting is essential to make a good decision in business operations, now traders pay more attention to this cost because it depends on it to be able to have a higher economic profitability.

hello @chucho27,
For companies that are manufacturing technological devices, the increase in the cost of materials affected their production and their income, a curious fact is that many technological products such as the tlf are suffering shortages of raw materials due to the pandemic. On the other hand, the demand for raw materials increased but the supply from the countries that extract these materials decreased, I believe that companies were severely affected by this situation in which it is a challenge to obtain raw materials.

Hello @chucho27

I rescue this you mention in your post "production cost accounting is neglected or poorly implemented", somehow this is one of the most weighty reasons when it comes to weighting material cost increase in business decision making.

Best regards, be well.

Greetings @chucho27
The cost accounting today is more valid than ever, because in the past it was not of great importance for traders, because they did not put so much interest in knowing the cost of an item, today with the accelerated inflation products, these rise in value in the course of their production therefore, should be made constant adjustments and cost accounting is the tool that allows els know exactly these values with the appropriate adjustments.
Thank you very much for sharing.

As we can see their is Increase in the cost of each and every thing. After the covid-19 because of this situation. We need to make proper decision so that we can keep the cost in the proper order so that it cannot cost more in the normal people pocket.

But if the price of transport increase we need to make a increase in the product also respectively.

Greetings @chucho27 undoubtedly accounting processes are essential to understand the functioning of the inflationary process and more in the situation we are living as a country, where the inflation variable has exceeded any expectations. Valuable delivery greetings