Cost of Product (Cost Price), the monetary equivalent of production costs, current expenditures of socialist enterprises for the production and marketing of the product. The cost of product involves expenditures for the means of production including wages and preparation expenses (R&D, the search for natural resources, etc.), as well as some components of the net income of society, including outlays for social insurance, etc. Since society undertakes to cover much of the labour power reproduction expenditures from the social consumption funds, the cost of the necessary product is present in the cost of product only in the amount corresponding to wages, and to remuneration for the labour of collective farm workers. Thus, the cost of product, while reflecting relations between society as a whole and its economic links, comprises some elements which have the nature of a surplus product, and, on the other hand, it excludes certain elements of social expenditure. Two types of cost of product can be distinguished: the individual cost of product (the cost of product of the enterprise) and the industry average cost. According to the economic nature of expenditure within an enterprise, the cost of product proper, which includes the expenditures for production, is distinguished from the commercial (full) cost of product comprising the expenditures for the manufacture and sale as well as the administrative and management expenses of high-level organisations. The movement of the cost of product depends on the evolution of wholesale prices and wage rates. Therefore, it may not directly follow the movement of the production costs of socialist enterprises. A systematic lowering of the cost of product is an important factor in raising the profitability of production, and increasing socialist accumulation and the volume of production, while consuming the same amount of production resources. The industry average cost is the basis for setting wholesale prices; therefore, its reduction affects the level of those prices, as well as retail prices. Since the cost of product incorporates most social production costs, its reduction directly produces a higher efficiency of social production. Cost reduction is influenced by major factors in improving the effectiveness of production such as the saving of raw and other materials, fuel and power, the better 72 utilisation of fixed production assets and labour resources. The principal cost reduction methods are: increasing labour productivity (which reduces the cost of labour per product unit); the intensified use of productive capacities (reduces depreciation expenditures per product unit); economical use of material resources; reducing management and maintenance costs; and improving quality of output (which cuts down operational expenditures for the user-enterprises). The cost of product is a major aggregated indicator of enterprise performance, covering the level of production control and organisation, the utilisation of technological advances, and labour discipline, as well as the effectiveness of measures to cut down waste, etc. Wherever economically feasible, ministries and departments assign enterprises the task of reducing the cost of product among other centralised indices.