What is the cost structure?

Cost structure refers to the proportion and distribution of various costs required by an enterprise to produce or provide services in the total cost. Including direct costs, indirect costs and fixed costs, in which direct costs are directly related to products or services, such as materials, labor, energy and so on. Indirect costs are costs that are not directly related to production or service but must be paid, such as management expenses and sales expenses. Fixed costs are costs that do not change with the change of output or sales volume, such as rent, depreciation, interest, etc.

By understanding the cost structure, enterprises can better grasp the composition and distribution of costs, optimize the cost structure and improve efficiency and competitiveness. For example, when reducing costs, enterprises can find relatively easy cost items through in-depth analysis of cost structure, and take corresponding measures to adjust and optimize, so as to achieve the purpose of saving costs.