Conditionally variable costs are included in them. Fixed and variable expenses of the enterprise

As you know, costs are the costs of an enterprise expressed in monetary terms for the production of goods.

It is very important for any company to have the most full information about costs. This allows you to correctly set the price of manufactured products, calculate the level of efficiency of processes, learn about the efficiency of resource use by specific departments, etc.

Definition

In general, specialists divide costs into fixed and variable e. Fixed costs do not depend on the level of output. These include renting premises, costs for personnel retraining, payment of utilities, etc.

The amount of variable costs depends on the volume of products produced. The main feature: when production stops, this type of waste disappears.

It should be noted that this division is very arbitrary. For example, they also distinguish conditionally variable costs. Their value depends on the company’s business activity, but such dependence is not direct. These include, for example, long-distance calls as part of the subscription fee for telephone services.

As a rule, variable expenses can be considered direct. This means that, firstly, they are directly related to the production of a product or service, and secondly, they can be included in the cost of goods based on primary documentation without any additional calculations.

You can find out more detailed information about these indicators in the following video:

Varieties

Without delving into the essence of the problem, one can decide that the growth of such costs grows with an increase in production volume, with an increase in product sales, etc. However, this is not entirely true. Depending on the nature of the output volume, variable costs include:

• proportional, which increase with an increase in production volume (if the production of goods increases by 20%, then spending proportionally increases by 20%);
• regressive variables, the growth rate of which is slightly behind the growth rate of production (if production increases by 20%, spending can only increase by 15%);
• progressive variable, which increase slightly faster than the production and sale of goods increases (if production increases by 20%, spending increases by 25%).

Thus, we see that the value of variable costs is not always directly proportional to the volume of production. For example, if, in the event of an expansion of the enterprise and an increase in the volume of output, a night shift is introduced, then the payment for it will be higher.

Direct and indirect costs among the variables are distinguished rather arbitrarily:

• Usually to straight lines refers to the costs that may be associated with the production of a particular product. They relate directly to the cost of the product. This could be spending on raw materials, fuel or wages for workers.
• To indirect General shop and plant expenses can be included, that is, those associated with the production of a group of goods. Due to factors such as technological specifics or economic feasibility, they cannot be attributed directly to cost. The most common example is the purchase of raw materials in complex industries.

In statistical documentation, expenses are divided into total and average. This division makes sense in the reporting documents of enterprises:

• Average are calculated by dividing variable expenses by the volume of goods produced.
• Are common is the sum of the organization's fixed and variable costs.

We can also talk about production and non-production types. This division is directly related to the manufacturing process of products:

• Production are included in the cost of goods. They are tangible and can be inventoried.
• Non-productive they no longer depend on production volumes, but on duration. Therefore, it is impossible to inventory them.

Thus, we can highlight the following most common examples of variable costs in production:

• wage workers, depending on the volume of goods produced by them;
• the cost of raw materials and other materials necessary for the manufacture of products;
• expenses for warehousing, transportation and storage of goods;
• interest paid to sales managers;
• taxes related to production volumes: VAT, excise taxes, etc.;
• services of other organizations related to production services;
• the cost of energy resources at enterprises.

How to count them?

For convenience, variable costs can be expressed schematically as follows:

• Variable expenses = Raw materials + Supplies + Fuel + Percentage of wages, etc.

For the convenience of calculating the dependence of expenses on production volume, the German economist Mellerovich introduced cost response factor (K). The formula showing the relationship between cost changes and productivity growth looks like this:

K = Y/X, Where:

• K is the cost response coefficient;
• Y – cost growth rate (in percent);
• X is the growth rate of production (trade exchange, business activity), also calculated as a percentage.

• 110% / 110% = 1

The response coefficient of progressive spending will be greater than one:

• 150% / 100% = 1,5

Therefore, the coefficient of regressive expenses is less than 1, but more than 0:

• 70% / 100% = 0,7

The cost of any unit of production can be expressed by the following formula:

Y= A + bX, Where:

• Y denotes total costs (at any monetary unit, for example, rubles);
• A – constant part (i.e. one that does not depend on production volumes);
• b – variable costs, which are calculated per unit of product (expense response coefficient);
• X is an indicator of the enterprise’s business activity, presented in natural units.

AVC = VC/Q, Where:

• AVC – average variable costs;
• VC – variable costs;
• Q – volume of output.

On the graph, average variable costs are usually presented as an increasing curved line.

Classification of costs.

A scientifically based classification of costs is of great importance for the correct organization of cost accounting. Production costs are grouped according to their place of origin, responsibility centers, cost carriers and types of expenses.

According to the place of origin, costs are grouped by production, workshop, site and other structural divisions of the enterprise. This grouping of costs is necessary for:

• monitoring the performance of structural divisions and the enterprise as a whole;
• distribution of overhead costs between individual types of products when calculating the cost of products (works, services).

Costs are distributed among responsibility centers (enterprise segments) to accumulate data on costs and control deviations from the estimate. A cost center is an organizational unit or area of ​​activity where it is advisable to accumulate information about the costs of acquiring assets and expenses.

Cost carriers are the types of products (works, services) of an enterprise intended for sale. This grouping is necessary to determine the cost per unit of production (work, services).

By type, costs are grouped by economically homogeneous elements and by costing items in accordance with the Regulations on the composition of costs for the production and sale of products (works, services) included in the cost of products (works, services).

For management accounting purposes, costs are divided into categories depending on what management task we need to decide.

Classification of costs depending on the goals of management accounting

Permanent and variable costs.

They are used when conducting break-even analysis and related indicators, as well as when optimizing manufactured products.

In relation to the volume of production or sales (level of business activity), costs are divided into “fixed” and “variable”.

Variable costs vary in proportion to the volume of production or sales, and calculated per unit of production are constant value. An example of variable costs for a trading enterprise is the cost of purchased goods, commissions and other expenses associated with sales, which change in proportion to changes in sales volume.

Dynamics of total (a) and specific (b) variable costs.
SP - total variable costs, rub. UPer - specific variable costs, rub.

Fixed costs in total do not change with changes in the level of business activity, but calculated per unit decrease with an increase in the volume of production or sales. Examples fixed costs include expenses for rent of premises, salaries of administrative personnel, and professional services. The total amount of these expenses is relatively independent of sales volume.

When dividing expenses into variable and fixed, you need to use the concept " area of ​​relevance", in which a special relationship between the planned relationships between revenue and costs is maintained. Thus, fixed costs are constant relative to a specific period, for example one year, but over time due to the impact external factors may increase or decrease (change in property tax rate, etc.).

Dynamics of total (a) and specific (b) fixed costs.
Spost - total fixed costs, rub. Upost - fixed costs per unit of production (specific), rub.

Some types of costs cannot be strictly defined in relation to production volume as variable or variable. Therefore, in management accounting, an additional group of semi-variable or semi-fixed costs is distinguished. These costs have both fixed and variable components. For example, the costs of maintaining a warehouse:

• Constant component - rental of warehouse space and utilities
• Variable component - warehouse processing services (operations for moving commodity items)

When classifying costs, variable and fixed components are separated into independent expense items, therefore semi-variable or semi-fixed costs are not allocated to a separate group.

Costs taken into account and not taken into account when assessing.

Adoption process management decision involves comparing several alternative options with each other in order to select the best one. The indicators compared can be divided into two groups: the first remain unchanged for all alternative options, the second varies depending on decision taken. It is advisable to compare only the indicators of the second group. These costs, which distinguish one alternative from another, are called relevant costs. Only they are taken into account when making decisions.

Example. An enterprise selling products on the foreign market purchased basic materials for future use in the amount of 500 rubles. Subsequently, due to changes in technology, it turned out that these materials were of little use for our own production. Products made from them will be uncompetitive in the foreign market. However Russian partner I am ready to buy products made from these materials from this enterprise for 800 rubles. In this case, the additional costs of the enterprise for the production of products will amount to 600 rubles. Is it advisable to accept such an order?

Expired costs for the purchase of materials in the amount of 500 rubles. have already taken place. They do not influence the choice of solution and are not relevant. Let's compare the alternatives based on relevant indicators (table).

By choosing alternative 2, the company will reduce its loss from the purchase of unnecessary materials by 200 rubles, reducing it from 500 to 300 rubles.

Approaches to cost reduction analysis.

Cost structure analysis

Construction of a cost management system.

1. Classification of costs.
2. Methodology for allocating costs by department, type of activity and type of product:
   • bases and principles of cost distribution;
   • formats of primary cost reporting forms;
   • methodology for filling out primary reporting forms;
   • a methodology for processing primary reporting forms that allows you to distribute costs between types of products, accounting objects and types of activities;
   • formats of management cost reports.
3. Choosing a costing method.
4. Consider cost reduction opportunities.
5. Conducting cost-volume-profit analysis.

Costing method based on variable costs ("direct-costing").

Its essence lies in a fundamentally new approach to the inclusion of costs in the cost price. Costs are divided into fixed and variable. Only variable costs are included in prime cost. To determine it, the amount of variable costs is divided by the number of products produced and services provided. Fixed costs are not included in the cost calculation at all, but as expenses of this period written off from the profits received during the period in which they were made. In other words, before calculating the operating profit, the company’s marginal profit indicator is formed, and only then, by reducing the company’s marginal profit by the amount of fixed costs, the financial result is formed.

There are many opinions about the legality of such incomplete inclusion of costs in the cost price. International accounting standards prohibit the use of this approach for preparing a company's financial statements in financial accounting. The main argument against this is the thesis that fixed costs are also involved in the process of creating products. But on the other hand, it turns out that fixed costs participate in different ways in creating the cost of different volumes of the same product, and it is almost impossible to calculate the actual participation of fixed costs in creating the cost, so their cost is simply written off from the profit received by the company.

Below are brief summary characteristics of the "direct-costing" and "absorption-costing" costing methods.

Marginal profit- is the excess of sales revenue over all variable costs associated with a given sales volume.

Therefore, the contribution margin method is based on the following formula:

Marginal profit = Revenue from product sales - Variable costs for the same volume of production

If we subtract fixed costs from marginal profit, we get the operating profit:

Operating profit = Contributory profit - Fixed costs

Example. The difference in the impact of full and variable cost accounting methods on the cost of goods sold. Let straight material costs per product is $59,136, direct labor is $76,384, variable manufacturing overhead is $44,352, and fixed manufacturing overhead is $36,960. During the year, 24,640 units of products were produced. There was no work in progress either at the beginning or at the end of the reporting period. The unit selling price is $24.50 and the variable selling costs per unit are $4.80. Fixed selling expenses for the period are $48,210 and fixed administrative expenses are $82,430.

Profit and Loss Statement (Margin Approach).

Revenues from sales $539,000

Variable portion of cost of goods sold

Variable part of the cost of goods for sale $179,872

Minus Final balances of finished products $19,272

Variable portion of cost of goods sold $160,600

Plus Variable Selling Expenses (22,000 x $4.80) $105,600 $266,200

Marginal profit $272,80 0

Minus Fixed expenses

Fixed overhead costs $36,960

Fixed business expenses $48,210

Permanent administrators expenses $82,430 $167,600

Operating profit (before tax) $105,200

Example. Price per unit - 10 thousand rubles, variable costs per unit - 6 thousand rubles, fixed overhead costs amounted to 300 thousand rubles. for the period, fixed general expenses amounted to 100 thousand rubles. during the period.

Full cost costing method.

Direct costing method of cost calculation.

Operating leverage.

Financial planning is necessary for the normal functioning of any company, forecasting production efficiency and profitability of all areas of activity. Its basis is a detailed analytical picture of all income received and costs incurred, which are classified as fixed and variable costs. This article will tell you what these terms mean, what criteria are used to distribute expenses in an organization, and why there is a need for such a division.

What are costs in production

The components of the cost of any product are costs. They all differ in the characteristics of their formation, composition, and distribution, depending on the production technology and available capacities. It is important for the economist to divide them according to cost elements, corresponding items and place of origin.

Expenses are classified into different categories. For example, they can be direct, that is, incurred directly in the production process of the product (materials, machine operation, energy costs and wages of shop personnel), and indirect, proportionally distributed over the entire range of products. These include costs that ensure the maintenance and functionality of the company, for example, uninterrupted technological process, utility costs, salaries of auxiliary and management units.

In addition to this division, costs are divided into fixed and variable. It is these that we will consider in detail.

Fixed production costs

Costs, the value of which does not depend on the volume of products produced, are called constant. They usually consist of costs vital for the normal implementation production process. These are costs for energy resources, rent of workshops, heating, marketing research, AUR and other general expenses. They are permanent and do not change even during short-term downtime, because the lessor charges rent in any case, regardless of the continuity of production.

Despite the fact that fixed costs remain unchanged over a certain (specified) period of time, fixed costs per unit of output change in proportion to the volume produced.
For example, fixed costs amounted to 1000 rubles, 1000 units of product were produced, therefore, each unit of production has 1 ruble of fixed costs. But if not 1000, but 500 units of a product are produced, then the share of fixed costs in a unit of goods will be 2 rubles.

When fixed costs change

Note that fixed costs are not always constant, since companies develop production capacities, update technologies, increase space and the number of employees. In such cases fixed costs also change. When conducting economic analysis, you need to take into account short periods when fixed costs remain constant. If an economist needs to analyze a situation over a long period of time, it is more appropriate to break it down into several short time periods.

Variable costs

In addition to the fixed costs of the enterprise, there are variables. Their value is a value that changes with fluctuations in output volumes. Variable expenses include:

According to the materials used in the production process;

According to the wages of shop workers;

Insurance deductions from payroll;

Depreciation of workshop equipment;

On the operation of vehicles directly involved in production, etc.

Variable costs vary in proportion to the quantity of goods produced. For example, doubling production volume is impossible without doubling total variable costs. However, the cost per unit of production will remain unchanged. For example, if the variable costs for producing one unit of product are 20 rubles, it will take 40 rubles to produce two units.

Fixed costs, variable costs: division into elements

All costs - fixed and variable - constitute the total costs of the enterprise.
To correctly reflect costs in accounting, calculate the sales value of a manufactured product and carry out an economic analysis of the company’s production activities, all of them are taken into account according to cost elements, dividing them into:

• supplies, materials and raw materials;
• staff remuneration;
• insurance contributions to funds;
• depreciation of fixed and intangible assets;
• others.

All costs allocated to elements are grouped into cost items and accounted for as either fixed or variable.

Example of cost calculation

Let us illustrate how costs behave depending on changes in production volume.

Analyzing the change in the price of a product, the economist concludes: fixed costs did not change in January, variables increased in proportion to the increase in the volume of product output, and the cost of the product decreased. In the presented example, the decrease in the price of the product is due to the constant costs of fixed costs. By predicting changes in costs, the analyst can calculate the cost of the product in the future reporting period.

As we remember, we need a business plan not only to understand the goals and ways to achieve them, but also to justify the profitability and possibility of implementing our investment project.

When making calculations for a project, you come across the concept of fixed and variable costs, or expenses.

What are they and what is their economic and practical meaning for us?

Variable expenses, by definition, are those expenses that are not constant. They change. And the change in their value is associated with the volume of products produced. The higher the volume, the higher the variable costs.

What cost items are included in them and how to calculate them?

All resources that are spent on production can be classified as variable costs:

• materials;
• components;
• employees' wages;
• electricity consumed by a running machine engine.

Cost of all necessary resources that must be spent to produce a certain volume of output. These are all material costs, plus wages of workers and maintenance personnel, plus the cost of electricity, gas, water spent in the production process, plus packaging and transportation costs. This also includes the costs of creating stocks of materials, raw materials and components.

Variable costs need to be known per unit of output. Then we can calculate at any time the total amount of variable costs for a certain period of time.
We simply divide the estimated cost of production by the volume of production in physical terms. We obtain variable costs per unit of production.

This calculation is made for each type of product and service.

How does unit costing differ from the variable cost of producing one product or service? Fixed costs are also included in the calculation.

Fixed costs are almost independent of production volumes.

These include:

• administrative expenses (costs of maintaining and renting offices, postal services, travel expenses, corporate communications);
• production maintenance costs (rent of production premises and equipment, machine maintenance, electricity, space heating);
• marketing expenses (product promotion, advertising).

Fixed costs remain unchanged until certain point until the production volume becomes too large.

An important step for determining variable and fixed costs, as well as everything financial plan is the calculation of personnel costs, which can also be carried out at this stage.

Based on the data we received in the organizational plan on structure, staffing, operating hours, as well as focusing on the data from the production program, we calculate personnel costs. We make this calculation for the entire period of the project.

It is necessary to determine the amount of remuneration for management personnel, production and other employees, as well as the total amount of expenses.

Don’t forget to take into account taxes and social contributions, which will also be included in the total amount.

All data is presented in tabular form for ease of calculation.

Knowing fixed and variable costs, as well as product prices, you can calculate the break-even point. This is the level of sales that ensures the enterprise’s self-sufficiency. At the break-even point, there is equality in the sum of all costs, fixed and variable, and the income from the sale of a certain volume of products.

Analysis of the break-even level will allow us to draw a conclusion about the sustainability of the project.

An enterprise should strive to reduce variable and fixed costs per unit of production, but this is not a direct indicator of production efficiency. It is necessary to take into account the specifics of the enterprise. High-tech industries may have high fixed costs, while low ones may occur in underdeveloped ones with old equipment. This can also be observed when analyzing variable costs.

The main goal of your company is to maximize economic profit. And this is not only cutting costs in any way, but also using various tools to reduce production and management costs through the use of more productive equipment and increased labor productivity.