Final answer:
The control that compares cost figures from the business plan with actual operation costs is Cost control, which requires monitoring various cost categories and evaluating them against projected figures to maintain financial health. The correct option is A.
Step-by-step explanation:
Understanding Cost Controls in Business
To address the question of comparing cost figures estimated in the business plan with actual day-to-day operations costs, the correct control is Cost control. This involves monitoring both the total operational costs and the individual component costs—such as fixed, variable, and marginal costs—to ensure they align with the forecasts and estimates laid out in the business plan.
The relationship between production and costs is intrinsic to this control process. Factors of production, including labor, materials, and overhead, come with associated costs known as factor prices. To manage these effectively, businesses often divide costs into various categories: total cost, fixed cost, variable cost, marginal cost, and average cost. Fixed costs remain constant regardless of production levels, whereas variable costs fluctuate with production volume. Marginal cost refers to the cost of producing one additional unit. Together, these metrics are used to calculate average profit and evaluate the cost structure's impact on the firm's potential profit.
Businesses must also assess per-unit costs, which include average cost, average variable cost, and marginal cost, to make informed pricing and production decisions. With this information, companies can determine the shutdown point—the point where the price falls below the average variable cost and it becomes more beneficial to cease production than to continue at a loss. Learning and applying these principles is crucial for maintaining financial health and making strategic decisions in both the short and long run.