An Evaluation of Production Business Process Costs Using a Time-Labour Approach

By Grigorieva, Viktoriya V.; Polozova, Anna N. et al. | Asian Social Science, April 2015 | Go to article overview

An Evaluation of Production Business Process Costs Using a Time-Labour Approach


Grigorieva, Viktoriya V., Polozova, Anna N., Borshevskay, Elena P., Kondrashova, Nadezhda V., Shamrina, Irina V., Asian Social Science


Abstract

The paper explains the reasons that make it difficult to carry out an objective evaluation of ways to reduce the total costs of production. It also examines the nature of individual costs and expenses and of the production factors that are needed for the realization of business activities. It also sets out the advantages and disadvantages of methods of evaluating production factors, and of instruments for evaluating the total costs associated with them. It describes the time-labour nature of individual production costs. It also shows the different stances taken by current total cost-pricing methodologies from the standpoints of: the manufacturer's interests, utility, the impact of market competition, and the presence of monopolies in the market. The unsuitability of such an approach when evaluating the real value of the total costs of goods is shown. It is demonstrated that labour has its natural and market price, and on this basis three variants showing the correlation between cost and price of labour-power are formulated. We propose to measure total costs not in price terms, but on a time-labour principle, based on the input of working time, since labour is one of the main factors of production. An estimate of production costs based on time-labour avoids the distorting impact of value, as it reflects the original time-labour substance within total costs.

Keywords: costs of production, business process, labour, time-labour contribution

JEL: D46, M11, J01

(ProQuest: ... denotes formulae omitted.)

1. Introduction

The entry into a market economy of processing enterprises within Russia's agro-industrial complex was accompanied by a number of inter-dependent negative phenomena, as a result of which the total costs of production of goods increased and continue to remain unjustifiably high. The overall reason for these negative consequences was the fact that the reforms that took place in Russia resulted mainly in fundamental changes in the sphere of supply, and at the same time the management of the core economic sphere - industrial and agricultural production - worsened significantly. In these conditions the fundamental principle of the market is ignored - success is determined by lower costs spent on the production of goods compared with their prices, and a reduction in both costs and price is necessary if profits are to increase. Due to the specific socio-economic conditions within the processing sector, enterprises cannot raise the prices of their products beyond a certain limit, therefore an increase in profits is achievable in reality primarily by lowering the costs incurred by the use of all forms of production resources during the entire production process, and in the management of business activities.

Preliminary research revealed the circumstances that make it difficult to carry out an objective evaluation of ways of reducing production costs in the processing sector, which result from the distorting impact of prices on the material and labour factors of production. Therefore, the authors regard as particularly important the theoretical positions of A. Marshall, J. Keynes, and J. Robinson on the economic nature and negative features of monopolistic prices on the factors of production; the position of E. I. Punin, who theoretically combined two approaches to the evaluation of factors of production - from the point of view of outlays on production and from the point of view of their utility, which he did not see as opposing, but as complementing each other; and the position of P. A. Ignatovsky, who sees reduction of labour costs as key to the development of production.

In today's market in Russia the exclusively high prices for energy and power resources, and industrial and transportation facilities, and exclusively low prices for raw materials and labour resources are at variance with their cost, and the indirect inclusion of these elements in an analysis of provisions for reducing production costs is a formality and insufficiently objective. …

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