Variable costs per unit. Variable costs: what are they, how to find and calculate them

Each enterprise incurs certain costs in the course of its activities. There are different ones. One of them involves dividing costs into fixed and variable.

The concept of variable costs

Variable costs are those costs that are directly proportional to the volume of products and services produced. If an enterprise produces bakery products, then the consumption of flour, salt, and yeast can be cited as an example of variable costs for such an enterprise. These costs will increase in proportion to the increase in the volume of bakery products produced.

One cost item can relate to both variable and fixed costs. Thus, energy costs for industrial ovens on which bread is baked will serve as an example of variable costs. And the cost of electricity for lighting an industrial building is a fixed cost.

There is also such a thing as conditionally variable costs. They are related to production volumes, but to a certain extent. At a small production level, some costs still do not decrease. If a production furnace is half loaded, then the same amount of electricity is consumed as a full furnace. That is, in this case, when production decreases, costs do not decrease. But as output increases above a certain value, costs will increase.

Main types of variable costs

Here are examples of variable costs of an enterprise:

• The wages of workers, which depend on the volume of products they produce. For example, in a bakery production there is a baker and a packer, if they have piecework wages. This also includes bonuses and rewards to sales specialists for specific volumes of products sold.
• Cost of raw materials. In our example, these are flour, yeast, sugar, salt, raisins, eggs, etc., packaging materials, bags, boxes, labels.
• are the cost of fuel and electricity that is spent on the production process. It could be natural gas, gasoline. It all depends on the specifics of a particular production.
• Another typical example of variable costs are taxes paid based on production volumes. These are excise taxes, taxes under tax), simplified taxation system (Simplified taxation system).
• Another example of variable costs is paying for services from other companies if the volume of use of these services is related to the organization's level of production. These could be transport companies, intermediary firms.

Variable costs are divided into direct and indirect

This division exists because different variable costs are included in the cost of the product differently.

Direct costs are immediately included in the cost of the product.

Indirect costs are distributed over the entire volume of goods produced in accordance with a certain base.

Average variable costs

This indicator is calculated by dividing all variable costs by production volume. Average variable costs can either decrease or increase as production volumes increase.

Let's look at the example of average variable costs in a bakery. Variable costs for the month amounted to 4,600 rubles, 212 tons of products were produced. Thus, average variable costs will be 21.70 rubles/t.

Concept and structure of fixed costs

They cannot be reduced in a short period of time. If output volumes decrease or increase, these costs will not change.

Fixed production costs usually include the following:

• rent for premises, shops, warehouses;
• utility fees;
• administration salary;
• costs of fuel and energy resources, which are consumed not by production equipment, but by lighting, heating, transport, etc.;
• advertising expenses;
• payment of interest on bank loans;
• purchase of stationery, paper;
• costs for drinking water, tea, coffee for employees of the organization.

Gross costs

All of the above examples of fixed and variable costs add up to gross, that is, the total costs of the organization. As production volumes increase, gross costs increase in terms of variable costs.

All costs, in essence, represent payments for purchased resources - labor, materials, fuel, etc. The profitability indicator is calculated using the sum of fixed and variable costs. An example of calculating the profitability of core activities: divide profit by the amount of costs. Profitability shows the effectiveness of an organization. The higher the profitability, the better the organization performs. If profitability is below zero, then expenses exceed income, that is, the organization’s activities are ineffective.

Enterprise cost management

It is important to understand the essence of variable and fixed costs. With proper management of costs in an enterprise, their level can be reduced and greater profits can be obtained. It is almost impossible to reduce fixed costs, so effective work to reduce costs can be carried out in terms of variable costs.

How can you reduce costs in your enterprise?

Each organization works differently, but basically there are the following areas of cost reduction:

1. Reducing labor costs. It is necessary to consider the issue of optimizing the number of employees and tightening production standards. An employee can be laid off, and his responsibilities can be distributed among others, with additional payment for additional work. If production volumes increase at the enterprise and the need arises to hire additional people, then you can go by revising production standards and or increasing the volume of work in relation to old employees.

2. Raw materials are an important part of variable costs. Examples of their abbreviations could be as follows:

• searching for other suppliers or changing the terms of delivery by old suppliers;
• introduction of modern economical resource-saving processes, technologies, equipment;

• stopping the use of expensive raw materials or materials or replacing them with cheap analogues;
• carrying out joint purchases of raw materials with other buyers from one supplier;
• independent production of some components used in production.

3. Reduction of production costs.

This may include selecting other rental payment options or subletting space.

This also includes savings on utility bills, which requires careful use of electricity, water, and heat.

Savings on repairs and maintenance of equipment, vehicles, premises, buildings. It is necessary to consider whether it is possible to postpone repairs or maintenance, whether it is possible to find new contractors for these purposes, or whether it is cheaper to do it yourself.

It is also necessary to pay attention to the fact that it may be more profitable and economical to narrow production and transfer some side functions to another manufacturer. Or, on the contrary, enlarge production and carry out some functions independently, refusing to cooperate with related companies.

Other areas of cost reduction may include the organization's transportation, Advertising activity, reducing the tax burden, paying off debts.

Any enterprise must take into account its costs. Work to reduce them will bring more profit and increase the efficiency of the organization.

Probably every person who has worked for the “owner” for at least one day wants to start their own business and be their own boss. But in order to open your own business, which will bring good earnings, you need to set up the financial model correctly economic activity.

Financial model of the enterprise

Why is this necessary? In order to have a correct idea of ​​future income, what level the enterprise’s fixed and variable expenses will have, to understand where it will be necessary to strive and what financial policy use during decision making.

Basis of construction successful business is its commercial component. According to economic theory, money is goods that can and should generate new goods. If you start your own business, you need to understand that its profitability must come first, otherwise the person will engage in philanthropy.

You can't work at a loss

Profit is equal to the difference between income and costs, which are divided into fixed and variable expenses of the enterprise. When expenses are greater than income, profit turns into loss. The main task The goal of an entrepreneur is to ensure that the business generates maximum income with minimal use of available resources.

This means that you should always strive to sell as many goods or services as possible, while reducing the level of costs of the enterprise.

If everything is more or less clear with income (how much you produced, how much you sold), then with expenses it’s much more complicated. In this article we will look at fixed and variable costs, as well as how to optimize costs and find a middle ground.

In this article, expenses, costs and expenses, as well as in economic literature, will be used as synonymous words. So what types of costs are there?

Types of expenses

All enterprise costs can be divided into fixed and variable costs. This division allows for prompt budgeting and planning of the necessary resources to conduct the business of the enterprise.

Fixed costs are those costs whose level does not depend on the volume of products produced. That is, no matter how many units you produce, your fixed costs will not change.

Variable and semi-fixed costs have different effects on production activities. Why conditionally constant? Because not all types of expenses can be classified as constant, since they can change their properties and accounting procedures from time to time.

What do variable and fixed costs include?

For example, such expenses may include salaries of administrative and management personnel, but only if they receive money regardless of the financial results of the enterprise. Despite the fact that in the West managers have long been making money on their managerial and organizational skills, increasing their client base and expanding markets, in most enterprises Russian Federation heads of different structures receive a stable monthly salary without reference to work results.

This leads to the fact that a person simply has no incentive to improve anything in his work. Because of this, labor productivity is at a low level, and the desire to move forward to new technological processes is generally at zero.

Fixed expenses

In addition to management salaries, rental payments can be considered fixed expenses. Imagine that you are in the tourism business and you do not have your own premises.

In this case, you will be forced to pay someone to rent the commercial property. And no one is saying that this is the worst option. The cost of building your own office from scratch is very high and in many cases will not pay off even in 5-10 years if the business is small or middle class.

Therefore, many people prefer to take the necessary square meters as rent. And you can immediately guess that regardless of whether your business has gone well or you are in deep loss, the landlord will demand the monthly payment specified in the contract.

What could be more stable in accounting than paying wages? This is depreciation. Any fixed asset must be depreciated month after month until its initial cost is zero.

Methods for calculating depreciation may be different, but, of course, within the framework of the law. These monthly expenses are also included in fixed costs enterprises.

There are many more such examples: communication services, communications, waste removal or recycling, provision of necessary working conditions, etc. Their main feature is that they are easy to calculate both in the current period and in future ones.

Variable expenses

Such costs are those that vary in direct proportion to the volume of products produced or services provided.

For example, in the balance sheet there is such a line as raw materials and materials. They indicate the total cost of those funds that the enterprise needs to production activities.

Let's assume that you need 2 square meters of wood to produce one wooden box. Accordingly, to create a batch of 100 such units of product you will need 200 sq.m of material. Therefore, such costs can be safely classified as variable.

Wages can relate not only to fixed, but also to variable expenses. This will happen in cases where:

• the changed volume of production requires a change in the number of employees employed in the manufacturing process;
• workers receive percentages that correspond to deviations in the working standard of production.

Under such circumstances, it is quite difficult to plan the amount of labor costs in the long term, since it will depend on at least two factors.

Also, during production activities, fuel and various types of fuel are consumed. energy resources: electricity, gas, water. If all these resources are used directly in the manufacturing process (for example, the production of a car), then it would be logical that a large batch of products would require an increased amount of energy consumption.

Why do you need to know what fixed and variable costs exist?

Of course, such a classification of costs is needed to optimize the cost structure in order to increase profits. That is, you can immediately understand which costs you can save on, and which ones will exist in any case, and they can be reduced only by reducing the level of production. What does an analysis of variable and fixed costs look like?

Let's say you produce furniture at an industrial level. Your cost items are as follows:

• raw materials and supplies;
• wage;
• depreciation;
• electricity, gas, water;
• other.

So far everything is easy and clear.

The first step is to divide all this into fixed and variable expenses.

Permanent:

1. Salaries of directors, accountants, economists, lawyers.
2. Depreciation deductions.
3. Used Electric Energy for lighting.

The variables include the following.

1. Wages of workers, the standardized number of which depends on the volume of furniture produced (one or two shifts, the number of people in one assembly box, etc.).
2. Raw materials and supplies necessary to produce one unit of product (wood, metal, fabric, bolts, nuts, screws, etc.).
3. Gas or electricity, if these resources are consumed directly for the manufacture of furniture. For example, this is the electricity consumption of various furniture assembly machines.

Impact of expenses on production costs

So, you have listed all the expenses of your business. Now let's see what role fixed and variable costs play in cost. It is necessary to go through all the fixed costs and see how the structure of the enterprise can be optimized so that less management personnel are involved in production during the production process.

The breakdown of fixed and variable expenses above shows where to start. You can save on energy resources either by switching to alternative sources, or during modernization, in order to increase the level of equipment efficiency.

After this, it’s worth going through all the variable costs, tracking which of them depend more or less on external factors, and which ones can be counted with confidence.

Once you understand the cost structure, you can easily transform any business to suit the needs and requirements of any owner and his strategic plans.

If your goal is to reduce product costs in order to win several positions in the sales market, then you should pay more attention to variable costs.

Of course, as soon as you understand what constitutes fixed and variable expenses, you will be able to easily navigate and quickly understand where you need to “tuck your tails between your legs” and where you can “loose your belts.”

This question may arise from a reader familiar with management accounting, which is based on accounting data, but pursues its own goals. It turns out that some techniques and principles management accounting can be used in regular accounting, thereby improving the quality of information provided to users. The author suggests familiarizing yourself with one of the ways to manage costs in accounting, which the document on calculating product costs will help with.

About the direct costing system

Management (production) accounting – management economic activity enterprise based information system, reflecting all the costs of the resources used. Direct costing is a subsystem of management (production) accounting based on the classification of costs into variable and fixed depending on changes in production volumes and cost accounting for management purposes only for variable costs. The purpose of using this subsystem is to increase the efficiency of resource use in production and economic activities and to maximize enterprise income on this basis.

In relation to production, there are simple and developed direct costing. When choosing the first option, the variables include straight lines material costs. All the rest are considered constant and are transferred in total to complex accounts, and then at the end of the period they are excluded from total income. This is income from the sale of manufactured products, calculated as the difference between the cost of products sold (revenue from sales) and variable cost. The second option is based on the fact that semi-variable costs, in addition to direct material ones, in some cases include variable indirect costs and part of the fixed costs, depending on the utilization rate of production capacity.

At the stage of implementation of this system, enterprises usually use simple direct costing. And only after its successful implementation can an accountant switch to more complex, developed direct costing. The goal is to increase the efficiency of resource use in production and economic activities and to maximize enterprise income on this basis.

Direct costing (both simple and developed) is distinguished by one feature: priority in planning, accounting, calculation, analysis and cost control is given to short-term and medium-term parameters compared to accounting and analysis of the results of past periods.

About the amount of coverage (marginal income)

The basis of the method of cost analysis using the “direct costing” system is the calculation of the so-called marginal income, or “coverage amount”. At the first stage, the amount of “coverage contribution” for the enterprise as a whole is determined. The table below displays this indicator along with other financial data.

As you can see, the amount of coverage (marginal income), which is the difference between revenue and variable costs, shows the level of reimbursement of fixed costs and profit generation. If fixed costs and the coverage amount are equal, the enterprise's profit is zero, that is, the enterprise operates at break-even.

Determination of production volumes that ensure break-even operation of the enterprise is carried out using a “break-even model” or establishing a “break-even point” (also called the coverage point, the point of critical production volume). This model is based on the interdependence between production volume, variable and fixed costs.

The break-even point can be determined by calculation method. To do this, you need to create several equations in which there is no profit indicator. In particular:

B = DC + AC;

c x O = DC + AC x O;

PostZ = (ts- AC) x O;

	PostZ _________		PostZ ______
	ts - peremS

B- revenues from sales;

PostZ– fixed costs;

PeremZ– for the entire volume of production (sales);

variable– variable costs per unit of production;

ts– wholesale price per unit of production (excluding VAT);

ABOUT– volume of production (sales);

md– the amount of coverage (marginal income) per unit of production.

Let us assume that during the period variable costs ( PeremZ) amounted to 500 thousand rubles, fixed costs ( PostZ) are equal to 100 thousand rubles, and the production volume is 400 tons. Determination of the break-even price includes the following financial indicators and calculations:

– ts= (500 + 100) thousand rubles. / 400 t = 1,500 rub./t;

– variable= 500 thousand rubles. / 400 t = 1,250 rub./t;

– md= 1,500 rub. - 1,250 rub. = 250 rub.;

– ABOUT= 100 thousand rubles. / (1,500 rub./t - 1,250 rub./t) = 100 thousand rub. / 250 rub./t = 400 t.

The level of the critical selling price, below which a loss occurs (that is, you cannot sell), is calculated using the formula:

c = PostZ / O + AC

If we plug in the numbers, the critical price will be 1.5 thousand rubles/t (100 thousand rubles / 400 t + 1,250 rubles/t), which corresponds to the result obtained. It is important for an accountant to monitor the break-even level not only in terms of unit price, but also in terms of the level of fixed costs. Their critical level, at which total costs (variables plus fixed) are equal to revenue, is calculated using the formula:

PostZ = O x md

If you plug in the numbers, then the upper limit of these costs is 100 thousand rubles. (250 rub. x 400 t). The calculated data allows the accountant not only to track the break-even point, but also to a certain extent to manage the indicators that affect this.

About variable and fixed costs

Dividing all costs into specified species is methodological basis cost management in the direct costing system. Moreover, these terms mean conditionally variable and conditionally fixed expenses, recognized as such with some approximation. In accounting, especially when it comes to actual costs, nothing can be constant, but small fluctuations in costs can not be taken into account when organizing a management accounting system. The table below presents the distinctive characteristics of the costs named in the heading of the section.

Fixed (semi-fixed) expenses	Variable (conditionally variable) expenses
Costs of production and sales of products that do not have a proportional connection with the quantity of products produced and remain relatively constant (time wages and insurance premiums, part of the costs of maintenance and production management, taxes and contributions to various funds)	Costs for the production and sale of products, varying in proportion to the quantity of products produced (technological costs for raw materials, materials, fuel, energy, and the corresponding share of the single social tax, part of transport and indirect costs)

The amount of fixed costs over a certain time does not change in proportion to changes in production volume. If production volume increases, then the amount of fixed costs per unit of output decreases, and vice versa. But fixed costs are not absolutely constant. For example, security costs are classified as permanent, but their amount will increase if the administration of the institution considers it necessary to increase the salaries of security workers. This amount may be reduced if the administration purchases such technical means, which will make it possible to reduce security personnel, and the savings on wages will cover the costs of purchasing these new technical equipment.

Some types of costs may include fixed and variable elements. An example is telephone costs, which include a constant term in the form of charges for long-distance and international telephone calls, but vary depending on the duration of the conversations, their urgency, etc.

The same types of costs can be classified as fixed and variable, depending on specific conditions. For example, the total amount of repair costs may remain constant as production volumes increase - or increase if production growth requires the installation of additional equipment; remain unchanged when production volumes are reduced, unless a reduction in the equipment fleet is expected. Thus, it is necessary to develop a methodology for dividing disputed costs into semi-variable and semi-fixed ones.

To do this, it is advisable for each type of independent (separate) expenses to assess the growth rate of production volumes (in physical or value terms) and the growth rate of selected costs (in value terms). The assessment of comparative growth rates is made according to the criterion adopted by the accountant. For example, this can be considered the ratio between the growth rate of costs and production volume in the amount of 0.5: if the growth rate of costs is less than this criterion compared to the growth of production volume, then the costs are classified as fixed costs, and in the opposite case, they are classified as variable costs.

For clarity, we present a formula that can be used to compare the growth rates of costs and production volumes and classify costs as constant:

	Aoi ____	x 100% - 100) x 0.5 >	Zoi ___	x 100% - 100, Where:

Aoi– volume of output of i-products for reporting period;

Abi– volume of output of i-products for the base period;

Zoi– i-type costs for the reporting period;

Zbi– i-type costs for the base period.

Let’s say that in the previous period the volume of production was 10 thousand units, and in the current period – 14 thousand units. Classified costs for equipment repair and maintenance are 200 thousand rubles. and 220 thousand rubles. respectively. The specified ratio is satisfied: 20 ((14 / 10 x 100% - 100) x 0.5)< 10 (220 / 200 x 100% - 100). Следовательно, по этим данным затраты могут считаться условно-постоянными.

The reader may ask what to do if during a crisis production does not grow, but declines. In this case, the above formula will take a different form:

	Abi ___	x 100% - 100) x 0.5 >	Zib ___	x 100% - 100

Let's assume that in the previous period the volume of production was 14 thousand units, and in the current period - 10 thousand units. Classified costs for repair and maintenance of equipment are 230 thousand rubles. and 200 thousand rubles. respectively. The specified ratio is satisfied: 20 ((14 / 10 x 100% - 100) x 0.5) > 15 (220 / 200 x 100% - 100). Therefore, according to these data, costs can also be considered semi-fixed. If costs have increased despite a decline in production, this also does not mean that they are variable. Fixed costs have simply increased.

Accumulation and distribution of variable costs

When choosing simple direct costing, when calculating variable costs, only direct material costs are calculated and taken into account. They are collected from the accounts , , (depending on the adopted accounting policy and methodology for accounting for inventories) and are written off to account 20 “Main production” (see Instructions for using the Chart of Accounts).

The cost of work in progress and semi-finished products of own production is accounted for at variable costs. Moreover, complex raw materials, the processing of which produces a number of products, also refers to direct costs, although they cannot be directly correlated with any one product. To distribute the cost of such raw materials among products, the following methods are used:

The indicated distribution indicators are suitable not only for writing off costs for complex raw materials used for manufacturing different types products, but also for production and processing in which direct distribution of variable costs to the cost of individual products is impossible. But it’s still easier to divide costs in proportion to sales prices or natural indicators of product output.

The company is introducing simple direct costing in production, which results in the production of three types of products (No. 1, 2, 3). Variable costs - for basic and auxiliary materials, semi-finished products, as well as fuel and energy for technological purposes. In total, variable costs amounted to 500 thousand rubles. Products No. 1 produced 1 thousand units, the selling price of which was 200 thousand rubles, products No. 2 – 3 thousand units with a total selling price of 500 thousand rubles, products No. 3 – 2 thousand units with a total selling price of 300 thousand . rub.

Let's calculate the cost distribution coefficients in proportion to sales prices (thousand rubles) and the natural output indicator (thousand units). In particular, the first will be 20% (200 thousand rubles / ((200 + 500 + 300) thousand rubles)) for product No. 1, 50% (500 thousand rubles / ((200 + 500 + 300) thousand rubles)) for products No. 2, 30% (500 thousand rubles / ((200 + 500 + 300) thousand rubles)) for products No. 3. The second coefficient will take the following values: 17% (1 thousand units / ((1 + 3 + 2) thousand units)) for product No. 1, 50% (3 thousand units / ((1 + 3 + 2) thousand units)) for product No. 2 , 33% (2 thousand units / ((1 + 3 + 2) thousand units)) for product No. 2.

In the table we will distribute variable costs according to two options:

Name	Types of cost distribution, thousand rubles.
	By product release	At selling prices
Product No. 1
Product No. 2
Product No. 3
Total amount

Options for the distribution of variable costs are different, and more objective, in the author’s opinion, is assignment to one or another group based on quantitative output.

Accumulation and distribution of fixed costs

When choosing a simple direct costing, fixed (conditionally fixed) costs are collected on complex accounts (cost items): 25 “General production expenses”, 26 “General business expenses”, 29 “Production and household maintenance”, 44 “Sales expenses”, 23 "Auxiliary production". Of the above, only commercial ones can be reflected in the reporting separately after the gross profit (loss) indicator (see the financial results statement, the form of which was approved by Order of the Ministry of Finance of the Russian Federation dated July 2, 2010 No. 66n). All other costs must be included in the cost of production. This model works with developed direct costing, when there are not so many fixed costs that they can not be distributed to the cost of production, but can be written off as a decrease in profit.

If only material costs are classified as variables, the accountant will have to determine the full cost of specific types of products, including variable and fixed costs. There are the following options for allocating fixed costs for specific products:

• in proportion to variable cost, including direct material costs;
• in proportion to the shop cost, including variable cost and shop expenses;
• in proportion to special cost distribution coefficients calculated on the basis of fixed cost estimates;
• natural (weight) method, that is, in proportion to the weight of the products produced or another natural measurement;
• in proportion to the “selling prices” accepted by the enterprise (production) according to market monitoring data.

In the context of the article and from the point of view of using a simple direct costing system, it begs the attribution of fixed costs to costing objects based on previously distributed variable costs (based on variable cost). We will not repeat ourselves; it would be better to point out that the distribution of fixed costs by each of the above methods requires special additional calculations, which are performed in the following order.

The total amount of fixed costs and the total amount of expenses according to the distribution base (variable cost, shop cost or other base) are determined from the estimate for the planned period (year or month). Next, the distribution coefficient of fixed expenses is calculated, reflecting the ratio of the amount of fixed expenses to the distribution base, according to the following formula:

				Zb, Where:

Kr– coefficient of distribution of fixed costs;

Salary– costs are constant;

Zb– distribution base costs;

n, m– number of cost items (types).

Let's use the conditions of example 1 and assume that the amount of fixed costs in the reporting period amounted to 1 million rubles. Variable costs are equal to 500 thousand rubles.

In this case, the distribution coefficient of fixed costs will be equal to 2 (1 million rubles / 500 thousand rubles). The total cost based on the distribution of variable costs (by product output) will be increased by 2 times for each type of product. We will show the final results taking into account the data from the previous example in the table.

Name	Variable costs, thousand rubles.	Fixed costs, thousand rubles.
Product No. 1
Product No. 2
Product No. 3
Total amount

The distribution coefficient is calculated similarly for applying the “proportional to sales prices” method, but instead of the sum of the costs of the distribution base, it is necessary to determine the cost of each type commercial products and all marketable products at prices of possible sales for the period. Next, the general distribution coefficient ( Kr) is calculated as the ratio of total fixed costs to the cost of marketable products in prices of possible sales using the formula:

				Ctp, Where:

Stp– the cost of marketable products in prices of possible sales;

p– number of types of commercial products.

Let's use the conditions of example 1 and assume that the amount of fixed costs in the reporting period amounted to 1 million rubles. The cost of manufactured products No. 1, 2, 3 in sales prices is 200 thousand rubles, 500 thousand rubles. and 300 thousand rubles. respectively.

In this case, the distribution coefficient of fixed costs is equal to 1 (1 million rubles / ((200 + 500 + 300) thousand rubles)). In fact, fixed costs will be distributed according to sales prices: 200 thousand rubles. for product No. 1, 500 thousand rubles. for product No. 2, 300 thousand rubles. – for product No. 3. In the table we show the result of the distribution of costs. Variable expenses distributed based on product sales prices.

Name	Variable costs, thousand rubles.	Fixed costs, thousand rubles.	Total cost, thousand rubles.
Product No. 1
Product No. 2
Product No. 3
Total amount

Although the general full cost All products in examples 2 and 3 are the same, for specific types this indicator differs and the accountant’s task is to choose a more objective and acceptable one.

In conclusion, variable and fixed costs are somewhat similar to direct and indirect costs, with the difference that they can be more effectively controlled and managed. For these purposes, on manufacturing enterprises and their structural divisions, cost management centers (CM) and responsibility centers for cost formation (CO) are created. The former calculates the costs that are collected in the latter. At the same time, the responsibilities of both the control center and the central authority include planning, coordination, analysis and cost control. If both there and there are distinguished between variable and fixed costs, this will allow them to be better managed. The question of the advisability of dividing expenses in this way, posed at the beginning of the article, is resolved depending on how effectively they are controlled, which also implies monitoring the profit (break-even) of the enterprise.

Order of the Ministry of Industry and Science of the Russian Federation dated July 10, 2003 No. 164, which introduced additions to the Methodological provisions for planning, accounting for costs of production and sales of products (works, services) and calculating the cost of products (works, services) at chemical enterprises.

This method is used with a predominant part of the main product and a small share of by-products, valued either by analogy with its costs in standalone production, or at the selling price minus the average profit.

Lecture:

Fixed and variable costs

Success entrepreneurial activity(business) is determined by the amount of profit, which is calculated using the formula: revenue – costs = profit .

What expenses must a manufacturer bear in order to create a product or service? This:

• costs of raw materials and supplies;
• expenses for utilities, transport and other services;
• payment of taxes, insurance premiums, loan interest;
• payment of salaries to employees;
• depreciation deductions.

Costs are otherwise called production costs. They are constant and variable. The firm's fixed and variable costs for the production and sale of a unit of goods are its cost price, which is expressed in monetary terms.

Fixed costs- these are costs that do not depend on the volume of output, that is, expenses that the manufacturer is forced to make even if his income does not amount to even a ruble.

These include:

• rental payments;
• taxes;
• interest on loans;
• insurance payments;
• utility costs;
• salaries of management personnel (administrators, salaries of managers, accountants, etc.);
• depreciation charges (costs of replacing or repairing worn-out equipment).

Variable costs – these are costs, the value of which depends on the volume of products produced.

Among them:

• costs of raw materials and supplies;
• fuel costs;
• payment for electricity;
• piecework wages for hired workers;
• expenses for transport services;
• costs for containers and packaging.

The dynamics of costs depends on the time factor. During the short-term period of a firm's activity, some factors are constant and others are variable. And over the long term, all factors are variable.

External and internal costs

Fixed and variable costs are reflected in the company's financial statements and are therefore external. But when analyzing the profitability of an enterprise, the manufacturer also takes into account internal or hidden costs associated with the resources actually used. For example, Andrey opened a store in his premises and works in it himself. He uses his own premises and his own labor, and the monthly income from the store is 20,000 rubles. Andrey can use these same resources in an alternative way. For example, renting out a room for 10,000 rubles. per month and got a job as a manager in a large company for a fee of 15,000 rubles. We see a difference in income of 5,000 rubles. These are internal costs - money that the manufacturer sacrifices. An analysis of internal costs will help Andrey use his own resources more profitably.
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Social studies mind map No. 23

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One of the main features of financial management (as well as management accounting) is that it divides costs into two main types:

a) variable or margin;

b) constant.

With this classification, it is possible to estimate how much the total cost will change with an increase in production volumes and sales of products. In addition, by estimating the total income for different volumes of products sold, it is possible to measure the amount of expected profit and cost with an increase in sales volumes. This method of management calculations is called break-even analysis or income assistance analysis.

Variable costs are costs that, with an increase or decrease in the volume of production and sales of products, respectively increase or decrease (in total). Variable costs per unit of output produced or sold represent the additional costs incurred in creating that unit. Such variable costs are sometimes called marginal costs per unit produced or sold, which are the same for each additional unit. Graphical total, variable and fixed costs are shown in Fig. 7.

Fixed costs are costs whose value is not affected by changes in the volume of production and sales of products. Examples of fixed costs are:

a) salary of management personnel, which does not depend on the volume of products sold;

b) rent for premises;

c) depreciation of machinery and mechanisms, accrued using the straight-line method. It is accrued regardless of whether the equipment is used partially, completely, or is completely idle;

d) taxes (on property, land).

Rice. 7. Graphs of total (total) costs

Fixed costs are the unchanging costs for this period time. Over time, however, they increase. For example, the rent for industrial premises for two years is twice the rent for a year. Similarly, depreciation charged on capital goods increases as the capital goods age. For this reason, fixed costs are sometimes called periodic costs because they are constant over a specific period of time.

General level fixed costs may vary. This happens when the volume of production and sales of products increases or decreases significantly (purchase of additional equipment - depreciation, recruitment of new managers - wages, hiring of additional premises - rent).

If the selling price of a unit of a certain type of product is known, then the gross revenue from the sale of this type of product is equal to the product of the selling price of a unit of product by the number of units sold.

When the volume of product sales increases by one unit, revenue increases by the same or constant amount, and variable costs also increase by a constant amount. Therefore, the difference between the selling price and the variable costs of each unit of output must also be constant. This difference between the selling price and unit variable costs is called gross profit per unit.

Example

A business entity sells a product for 40 rubles. per unit and expects to sell 15,000 units. There are two technologies for producing this product.

A) The first technology is labor-intensive, and variable costs per unit of production are 28 rubles. Fixed costs are equal to 100,000 rubles.

B) The second technology uses equipment that facilitates labor, and variable costs per unit of production are only 16 rubles. Fixed costs are equal to 250,000 rubles.

Which of the two technologies allows you to get higher profits?

Solution

The break-even point is the volume of product sales at which the revenue from its sale is equal to the gross (total) costs, i.e. there is no profit, but there are also no losses. Gross profit analysis can be used to determine the break-even point because if

revenue = variable costs + fixed costs, then

revenue - variable costs = fixed costs, i.e.

total gross profit = fixed costs.

To break even, the total gross profit must be sufficient to cover fixed costs. Since the total gross profit is equal to the product of the gross profit per unit of product and the number of units sold, the break-even point is determined as follows:

Example

If the variable costs per unit of product are 12 rubles, and the proceeds from its sale are 15 rubles, then the gross profit is equal to 3 rubles. If fixed costs are 30,000 rubles, then the break-even point is:

30,000 rub. / 3 rub. = 10,000 units

Proof

Gross profit analysis can be used to determine the volume of sales (sales) of products required to achieve the planned profit for a given period.

Because the:

Revenue - Gross costs = Profit

Revenue = Profit + Gross costs

Revenue = Profit + Variable costs + Fixed costs

Revenue - Variable costs = Profit + Fixed costs

Gross profit = Profit + Fixed costs

The required gross profit must be sufficient: a) to cover fixed costs; b) to obtain the required planned profit.

Example

If a product is sold for 30 rubles, and unit variable costs are 18 rubles, then the gross profit per unit of product is 12 rubles. If fixed costs are equal to 50,000 rubles, and the planned profit is 10,000 rubles, then the sales volume required to achieve the planned profit will be:

(50,000 + 10,000) / 125,000 units.

Proof

Example

Estimated profit, break-even point and target profit

XXX LLC sells one type of product. Variable costs per unit of production are 4 rubles. At a price of 10 rubles. demand will be 8,000 units, and fixed costs will be 42,000 rubles. If you reduce the price of the product to 9 rubles, then demand increases to 12,000 units, but fixed costs will increase to 48,000 rubles.

You need to determine:

a) estimated profit at each selling price;

b) break-even point at each selling price;

c) the volume of sales required to achieve the planned profit of 3,000 rubles at each of the two prices.

b) To break even, gross profit must equal fixed costs. The break-even point is determined by dividing the sum of fixed costs by the gross profit per unit of production:

42,000 rub. / 6 rub. = 7,000 units

48,000 rub. / 5 rub. = 9,600 units

c) The total gross profit required to achieve the planned profit of 3,000 rubles is equal to the sum of fixed costs and planned profit:

Break-even point at a price of 10 rubles.

(42,000 + 3,000) / 6 = 7,500 units.

Break-even point at a price of 9 rubles.

(48,000 + 3,000) / 5 = 10,200 units.

Gross profit analysis is used in planning. Typical cases of its application are as follows:

a) choosing the best selling price for the product;

b) choosing the optimal technology for producing a product if one technology gives low variable and high fixed costs, and the other gives higher variable costs per unit of production, but lower fixed costs.

These problems can be solved by determining the following quantities:

a) estimated gross profit and profit for each option;

b) break-even sales volume of products for each option;

c) the volume of product sales necessary to achieve the planned profit;

d) the volume of product sales at which two different production technologies give the same profit;

e) the volume of product sales necessary to eliminate the bank overdraft or to reduce it to a certain level by the end of the year.

When solving problems, it is necessary to remember that the volume of product sales (i.e., demand for products at a certain price) is difficult to accurately predict, and the analysis of the estimated profit and break-even volume of product sales should be aimed at taking into account the consequences of failure to meet planned targets.

Example

New company TTT is created to produce a patented product. Company directors are faced with a choice: which of two production technologies to prefer?

Option A

The company purchases parts, assembles finished products from them, and then sells them. Estimated costs are:

Option B

The company purchases additional equipment that allows it to perform some technological operations in the company's own premises. Estimated costs are:

Maximum possible productive capacity for both options - 10,000 units. in year. Regardless of the sales volume achieved, the company intends to sell the product for 50 rubles. for a unit.

Required

Conduct an analysis of the financial results of each of the options (as far as available information allows) with appropriate calculations and diagrams.

Note: taxes are not taken into account.

Solution

Option A has higher variable costs per unit of output, but also lower fixed costs than Option B. The higher fixed costs of Option B include additional depreciation amounts (for more expensive premises and new equipment), as well as interest costs on bonds, since option B involves the company in financial dependence. The above decision does not address the concept of debt, although it is part of the full answer.

The estimated output volume is not given, so the uncertainty of product demand must be important element solutions. However, it is known that the maximum demand is limited by production capacity (10,000 units).

Therefore we can define:

a) maximum profit for each option;

b) break-even point for each option.

a) if the need reaches 10,000 units.

Option B gives higher profits with higher sales volumes.

b) to ensure break-even:

Break-even point for option A:

80,000 rub. / 16 rub. = 5,000 units

Break-even point for option B

185,000 rub. / 30 rub. = 6,167 units

The break-even point for option A is lower, which means that if demand increases, profit under option A will be received much faster. In addition, when demand is low, option A results in higher profits or lower losses.

c) if option A is more profitable at low sales volumes, and option B is more profitable at high volumes, then there must be some point of intersection at which both options have the same total profit for the same total product sales volume. We can determine this volume.

There are two methods for calculating sales volume at the same profit:

Graphic;

Algebraic.

The most visual way to solve the problem is to plot the dependence of profit on sales volume. This graph shows the profit or loss for each sales value for each of the two options. It is based on the fact that profit increases evenly (straightforward); gross profit for each additional unit of product sold is a constant value. In order to build a straight-line profit graph, you need to plot two points and connect them.

With zero sales, the gross profit is zero, and the company suffers a loss in an amount equal to fixed costs (Fig. 8).

Algebraic solution

Let the sales volume at which both options give the same profit be equal to x units. Total profit is total gross profit minus fixed costs, and total gross profit is gross profit per unit multiplied by x units.

According to option A, the profit is 16 X - 80 000

Rice. 8. Graphic solution

According to option B, the profit is 30 X - 185 000

Since with sales volume X units the profit is the same, then

16X - 80 000 = 30X - 185 000;

X= 7,500 units

Proof

An analysis of the financial results shows that due to the higher fixed costs of option B (partly due to the cost of paying interest on the loan), option A comes to breakeven much faster and is more profitable up to a sales volume of 7,500 units. If demand is expected to exceed 7,500 units, then option B will be more profitable. Therefore, it is necessary to carefully study and evaluate the demand for this product.

Since the results of demand assessment can rarely be considered reliable, it is recommended to analyze the difference between the planned volume of product sales and the break-even volume (the so-called “safety zone”). This difference shows how much the actual volume of product sales can be less than planned without loss for the enterprise.

Example

A business entity sells a product at a price of 10 rubles. per unit, and variable costs are 6 rubles. Fixed costs are equal to 36,000 rubles. The planned sales volume of products is 10,000 units.

Planned profit is determined as follows:

Break even:

36,000 / (10 - 6) = 9,000 units.

The “safety zone” is the difference between the planned volume of product sales (10,000 units) and the break-even volume (9,000 units), i.e. 1,000 units As a rule, this value is expressed as a percentage of the planned volume. Thus, if in in this example the actual sales volume of products is less than planned by more than 10%, the company will not be able to break even and will incur a loss.

Most complex analysis gross profit - calculation of the volume of sales required to eliminate a bank overdraft (or to reduce it to a certain level) during a certain period (year).

Example

An economic entity buys a machine to produce a new product for 50,000 rubles. The price structure of the product is as follows:

The machine is purchased entirely through an overdraft. In addition, all other financial needs are also covered by an overdraft.

What should be the annual volume of products sold to cover the bank overdraft (by the end of the year), if:

a) all sales are made on credit and debtors pay them within two months;

b) inventories of finished products are stored in the warehouse for one month until they are sold and are valued in the warehouse at variable costs (as work in progress);

c) suppliers of raw materials provide a business entity with a monthly loan.

In this example, a bank overdraft is used to purchase the machine, as well as to cover general operating costs (all of which are paid in cash). Depreciation is not a cash expense, so the amount of overdraft is not affected by the amount of depreciation. During the manufacture and sale of a product, variable costs are incurred, but they are covered by revenue from the sale of products, resulting in the formation of a gross profit.

The gross profit per unit of product is 12 rubles. This figure may suggest that the overdraft can be covered with a sales volume of 90,000 / 12 = 7,500 units. However, this is not the case, since it ignores the increase in working capital.

A) Debtors pay for the goods they purchase on average after two months, so out of every 12 units sold, two remain unpaid at the end of the year. Consequently, on average, out of every 42 rubles. sales (unit price) one sixth (RUB 7) at the end of the year will be outstanding receivables. The amount of this debt will not reduce the bank overdraft.

B) Similarly, at the end of the year there will be a month's supply of finished products in the warehouse. The cost of producing these products is also an investment in working capital. This investment requires funds, which increases the overdraft amount. Since this increase in inventories represents the monthly sales volume, it is on average equal to one-twelfth of the variable costs of producing a unit of output (2.5 rubles) sold during the year.

C) The increase in accounts payable compensates for the investment in working capital, since at the end of the year, due to the provision of a monthly loan, on average, out of every 24 rubles spent on the purchase of raw materials (24 rubles - material costs per unit of production), 2 rubles . will not be paid.

Let's calculate the average cash receipts per unit of production:

To cover the cost of the machine and operating expenses and thus eliminate the overdraft for the year, product sales must be

90,000 rub. / 4.5 rub. (cash) = 20,000 units.

With an annual sales volume of 20,000 units. profit will be:

The effect on cash receipts is best illustrated by the balance sheet example of a change in cash position:

In aggregate form as a source and use report Money:

Profits are used to finance the purchase of the machine and investment in working capital. Therefore, by the end of the year the following change in the cash position occurred: from an overdraft to a “no change” position - i.e. the overdraft has just been repaid.

When solving such problems, a number of features should be taken into account:

– depreciation expenses should be excluded from fixed costs;

– investments in working capital are not fixed expenses and do not affect the break-even analysis at all;

– draw up (on paper or mentally) a report on the sources and use of funds;

– expenses that increase the size of the overdraft are:

– purchase of equipment and other fixed assets;

– annual fixed costs, excluding depreciation.

The gross profit ratio is the ratio of gross profit to selling price. It is also called the "income-revenue ratio." Since unit variable costs are a constant value and, therefore, at a given selling price, the amount of gross profit per unit of product is also constant, the gross profit coefficient is a constant for all values ​​of sales volume.

Example

Specific variable costs for a product are 4 rubles, and its selling price is 10 rubles. Fixed costs amount to 60,000 rubles.

The gross profit ratio will be equal to

6 rub. / 10 rub. = 0.6 = 60%

This means that for every 1 rub. the income received from sales, the gross profit is 60 kopecks. To ensure break-even, gross profit must be equal to fixed costs (60,000 rubles). Since the above coefficient is 60%, the gross revenue from product sales required to ensure break-even will be 60,000 rubles. / 0.6 = 100,000 rub.

Thus, the gross profit ratio can be used to calculate the break-even point

The gross profit ratio can also be used to calculate the volume of product sales required to achieve a given profit level. If a business entity wanted to make a profit in the amount of 24,000 rubles, then the sales volume should have been the following amount:

Proof

If the problem gives sales revenue and variable costs, but does not give the selling price or unit variable costs, you should use the gross profit ratio method.

Example

Using the Gross Profit Ratio

The business entity has prepared a budget for its activities for next year:

The company's directors are not satisfied with this forecast and believe that it is necessary to increase sales.

What level of product sales is necessary to achieve a given profit of 100,000 rubles.

Solution

Since neither the selling price nor unit variable costs are known, it should be used to solve the problem gross profit. This coefficient has constant value for all sales volumes. It can be determined from the available information.

Analysis of decisions made

Analysis of short-term decisions involves choosing one of several possible options. For example:

a) selection of the optimal production plan, product range, sales volumes, prices, etc.;

b) choosing the best of mutually exclusive options;

c) deciding on the advisability of conducting a specific type of activity (for example, whether an order should be accepted, whether additional work shift, whether to close the branch or not, etc.).

Decisions are made in financial planning when it is necessary to formulate the production and commercial plans of an enterprise. Analysis of decisions made in financial planning often comes down to the application of variable costing methods (principles). The main task of this method is to determine which costs and incomes will be affected by the decision made, i.e. what specific costs and revenues are relevant for each of the proposed options.

Relevant costs are costs of a future period that are reflected in cash flow as a direct consequence of the decision made. Only relevant costs should be considered in the decision-making process, since it is assumed that future profits will ultimately be maximized provided that the business entity's "monetary profit", i.e. cash income received from the sale of products minus cash costs for production and sales of products are also maximized.

Costs that are not relevant include:

a) past costs, i.e. money already spent;

b) future expenses resulting from previously decisions made;

c) non-cash costs, for example, depreciation.

The relevant costs per unit of output are typically the variable (or marginal) costs of that unit.

It is assumed that profits ultimately produce cash receipts. Declared profit and cash receipts for any period of time are not the same thing. This is explained for various reasons, for example, time intervals when granting loans or features of depreciation accounting. Ultimately, the resulting profit gives a net influx of an equal amount of cash. Therefore, in decision accounting, cash receipts are treated as a means of measuring profit.

The “opportunity cost” is the income that a company gives up by choosing one option over the most profitable alternative. Let us assume as an example that there are three mutually exclusive options: A, B and C. The net profit for these options is equal to 80, 100 and 90 rubles, respectively.

Since you can choose only one option, option B seems to be the most profitable, since it gives the greatest profit (20 rubles).

A decision in favor of B will be made not only because he makes a profit of 100 rubles, but also because he makes a profit of 20 rubles. more profit than the next most profitable option. "Opportunity cost" can be defined as "the amount of revenue that a company sacrifices in favor of an alternative option."

What happened in the past cannot be returned. Management decisions only affect the future. Therefore, in the decision-making process, managers only need information about future costs and income that will be affected by the decisions made, since they cannot affect past costs and profits. Past expenses in decision-making terminology are called sunk costs, which:

a) either have already been accrued as direct costs for the manufacture and sale of products for the previous reporting period;

b) or will be accrued in subsequent reporting periods, despite the fact that they have already been made (or the decision to make them has already been made). An example of such a cost is depreciation. After the acquisition of fixed assets, depreciation may accrue over several years, but these costs are sunk.

Relevant costs and income are deferred income and expenses arising from the choice of a particular option. They also include revenues that could have been earned by choosing another option, but which the enterprise foregoes. "Opportunity value" is never shown in financial statements, but it is often mentioned in decision-making documents.

One of the most common problems in the decision-making process is making decisions in a situation where there are not enough resources to meet potential demand and a decision must be made on how to most effectively use the available resources.

The limiting factor, if any, should be determined when preparing the annual plan. Limiting factor decisions therefore relate to routine rather than ad hoc actions. But even in this case, the concept of “cost of chance” appears in the decision-making process.

There may be only one limiting factor (other than maximum demand), or there may be several limited resources, two or more of which may set the maximum level of activity that can be achieved. To solve problems with more than one limiting factor, operations research methods (linear programming) should be used.

Solutions to Limiting Factors

Examples of limiting factors are:

a) volume of product sales: there is a limit to the demand for products;

b) labor force (total number and by specialty): there is a shortage work force to produce a volume of products sufficient to meet demand;

c) material resources: there is not a sufficient amount of materials to manufacture products in the volume necessary to meet demand;

d) production capacity: productivity technological equipment insufficient to produce the required volume of products;

d) financial resources: there is not enough cash to pay the necessary production costs.