Logic - Cost

There are 4 main determinants of cost as indicated. These are self evident and each has different techniques for reducing them. In MikesBikes-Advanced they are as follows:

• Development cost is the original amount that must be spent to develop a new project - basically a research and development cost.
• The prime cost is the ongoing direct per unit cost of making the product.
• The overheads are the costs associated with the firm that cannot be directly allocated.
• Process improvement is not a cost. It is a way of reducing costs by ongoing investment in the improvement of the production process - as is supported by TQM and JIT initiatives.