What is permanent? Does it make sense to divide costs into fixed and variable? Fixed production costs

Production costs are actually payments for purchased factors. Their research must provide certain volumes of production in order to fully cover the costs and ensure an acceptable profit. Income is a dynamic driver of organizational activity; costs are an important component for economic analysis. Organizations approach profit and cost differently. Income must provide maximum production possibilities for a given cost value. The greatest production efficiency will be at the lowest cost. They will include the costs of producing the goods. For example, the purchase of raw materials, electricity, payment of working hours, depreciation, organization of production. Part of the proceeds will be used to pay off production costs incurred, while the other will remain profit. This allows us to assert that costs are less than the price of the product by the profit margin.

The above statements lead to the conclusion: production costs are the costs of obtaining goods, and one-time costs arise only during the initial organization of production.

A company faces many ways to generate profit and convert it into cash. For each method, the leading factors will be costs - the real costs that the organization incurs during production activities to get a positive income. If management ignores expenses, then financial and economic activities become unpredictable. The profit at such an enterprise begins to decrease, and over time becomes negative, which means a loss.

In practice, this happens due to the inability to describe production costs in detail. Even an experienced economist will not always understand the structure of costs, existing relationships and the main factors of production.

Analyzing costs should begin with classification. It will provide a comprehensive understanding of the main characteristics and properties of costs. Costs are a complex phenomenon and cannot be represented using a single classification. Generally speaking, each enterprise can be considered a trading, manufacturing or service enterprise. The information presented applies to all enterprises, but to a greater extent to manufacturing ones, since they have a more complex cost structure.

The main differences in the general classification will be the place where costs appear and their relationship to areas of activity. The above classification is used to systematize expenses in profit reports, for comparative analysis required types of costs.

Primary types of expenses:

• Production

1. production invoices;
2. direct materials;
3. direct labor.

• Non-productive

1. operating expenses;
2. administrative expenses.

Direct costs are always variable. But in general production, commercial and general economic costs, fixed costs coexist with variable costs. A simple example: mobile phone charges. The constant component will be the subscription fee, and the variable component is determined by the amount of time agreed upon and the availability of long-distance calls. When accounting for costs, it is necessary to clearly understand the classification of costs and correctly separate them.

According to the classification used, costs are divided into non-production and production. Manufacturing costs include: direct labor, direct materials, and production overhead. Spending on direct materials consists of the costs that the enterprise had when purchasing raw materials and components, in other words, what is directly related to production and passed into finished products.

Direct labor costs mean payment production personnel and the effort involved in producing the product. Payments for shop foremen, managers and equipment adjusters are production overhead costs. It is worth considering the accepted convention when defining it in modern manufacturing, where “real direct” labor is rapidly declining in highly automated production. In some enterprises, production is fully automated, which does not require direct labor. But the designation “main production workers” is retained; payment is considered the cost of direct labor of the enterprise.

Manufacturing overhead costs include the remaining costs of maintaining production. In practice, the structure is complex, the volumes are scattered over a wide range. Typical manufacturing overhead costs include indirect materials, electricity, indirect labor, equipment maintenance, thermal energy, renovation of premises, part of tax payments that are included in gross costs and other things inherently related to the production of products in the company.

Non-production costs are divided into sales and administrative costs. The costs of selling a product consist of expenses that were aimed at preserving the product, promoting it on the market, and delivering it. Administrative costs are the totality of all expenses for managing a company - maintaining the management apparatus: planning and financial department, accounting.

Financial analysis implies a gradation of costs: variable and fixed. The division is justified by the contradictory reaction to changes in production volume. Western theory and practice of management accounting takes into account a number of distinctions:

• cost division method;
• conditional classification of costs;
• influence of production volume on cost behavior.

Systematization is important for planning and analyzing production. Fixed costs remain relatively constant in magnitude. When production increases, they turn out to be an important component in reducing costs; when volume increases, their share in a unit of finished goods decreases.

Variable costs

Variable costs will be costs, one hundred percent of which is directly proportional to production volume. Variable costs are directly proportional to production volumes. Growth occurs when output increases and vice versa. However, in units of production, variable costs will remain constant. They are usually classified by percentage changes depending on production volume:

• progressive;
• degressive;
• proportional.

Variable management should be based on economy. It is achieved through organizational and technical measures that reduce the share of costs per unit of goods:

• productivity growth;
• reducing the number of workers;
• reduction in inventories of materials and finished products during difficult economic periods.

Variable costs are used in break-even analysis of production, selection economic policy, planning economic activity.

Fixed costs will be costs, 100% of which are not determined by production. Fixed costs per unit of output will decrease as production volume increases and, conversely, increase as production volume decreases.

Fixed expenses are associated with the existence of the organization and are paid even in the absence of production - rent, payment for management activities, depreciation of buildings. Fixed costs, in other words, are called overhead, indirect.

The high level of fixed costs is determined by labor characteristics, which depend on mechanization and automation, and the capital intensity of products. Fixed costs are less susceptible to sudden changes. In the presence of objective limitations, there is a great potential for reducing fixed costs: the sale of unnecessary assets. Reducing administrative and management costs, reducing utility bills by saving energy, renting or leasing equipment.

Mixed costs

In addition to variable and fixed costs, there are other costs that do not lend themselves to the above classification. They will be constant and variable, called “mixed”. The following methods for classifying mixed costs into variable and fixed parts are accepted in economics:

• method of experimental assessments;
• engineering or analytical method;
• graphical method: the dependence of volume on the cost of goods is established (supplemented with analytical calculation);
• economic and mathematical methods: least squares method; correlation method, low-high point method.

Each industry has its own dependence of each type of cost on production volume. It may turn out that some expenses are considered variable in one industry, and constant in another.

It is impossible to use a single classification of dividing costs into variable or constant for all industries. The range of fixed costs cannot be uniform for different industries. It must take into account the specifics of production, the enterprise and the procedure for assigning costs to cost. The classification is created individually for each area, technology or production organization.

The standards allow differentiation of costs based on changes in production volume.

Fixed and variable costs are the basis of a common economic method. It was first proposed by Walter Rautenstrauch in 1930. This was a planning option, which in the future was called the break-even schedule.

It is actively used by modern economists in various modifications. The main advantage of the method is that it allows you to quickly and accurately predict the main performance indicators of the company when market conditions change.

When constructing, the following conventions are used:

• the price of raw materials is assumed to be constant for the planning period under consideration;
• fixed costs remain unchanged over a certain sales range;
• variable costs remain constant per unit as sales volume changes;
• uniformity of sales is accepted.

The horizontal axis indicates production volumes as a percentage of capacity used or per unit of goods produced. The verticals indicate income and production expenses. All costs on the graph are usually divided into variable (PV) and constant (FP). Additionally, gross costs (VI) and sales revenue (VR) are applied.

The intersection of revenue and gross costs forms the break-even point (K). At this point, the company will not make a profit, but will not incur losses either. The volume at the break-even point is called critical. If the actual value is less than the critical value, then the organization is operating at a disadvantage. If production volumes are greater than the critical value, then profit is generated.

You can determine the break-even point using calculations. Revenue is the total value of costs and profit (P):

BP = P+PI+POI,

IN break-even point P = 0, accordingly the expression takes a simplified form:

BP = PI + POI

Revenue will be the product of the cost of production and the volume of goods sold. Variable costs are rewritten through the output volume and SPI. Taking into account the above, the formula will look like:

C*Vkr = POI + Vkr*SPI

• Where SPI- variable costs per unit of production;
• C- unit cost of goods;
• Vkr- critical volume.

Vkr = POI/(C-SPI)

Break-even analysis allows you to determine not only the critical volume, but also the volume to obtain the planned income. The method allows you to compare several technologies and choose the most optimal one.

Cost and cost reduction factors

Analysis of the actual cost of production, determination of reserves, and the economic effect of reduction is based on calculations based on economic factors. The latter make it possible to cover most processes: labor, its objects, means. They characterize the main areas of work to reduce the cost of goods: increasing productivity, efficient use of equipment, introducing new technologies, modernizing production, reducing the cost of workpieces, reducing the management staff, reducing defects, non-production losses, and expenses.

Cost savings are determined by the following factors:

• Growth of technical level. This occurs with the introduction of more advanced technologies, automation and mechanization of production, better use of raw materials and new materials, revision of technological characteristics and product design.
• Modernization of work organization and productivity. Cost reduction occurs when production organization, methods and forms of labor change, which is facilitated by specialization. Improve management while minimizing costs. They are reviewing the use of fixed assets, improving logistics and minimizing transportation costs.
• Reduction of semi-fixed costs by changing the structure and volume of production. This reduces depreciation, changes the assortment and quality of goods. The volume of output does not directly affect semi-fixed costs. With an increase in volumes, the share of semi-fixed costs per unit of goods will decrease, and accordingly the cost will decrease.
• Better use of natural resources is required. It is worth considering the composition and quality of the source material, changes in mining methods and location of deposits. This is an important factor that shows the influence of natural conditions on variable costs. The analysis should be based on industry methodologies of the extractive industry.
• Industry factors, etc. This group includes the development of new workshops, production and production units, as well as preparation for them. Reserves for cost reduction are periodically reviewed when liquidating old ones and introducing new ones, which will improve economic factors.

Reduced fixed costs:

• reduction of administrative and commercial expenses;
• reduction in commercial services;
• increased load;
• sale of unused intangible and current assets.

Reduced variable costs:

• reducing the number of main and auxiliary workers by increasing labor productivity;
• use of time-based payment;
• preference for resource-saving technologies;
• use of more economical materials.

The listed methods lead to the following conclusion: cost reduction should mainly occur by minimizing preparatory processes, mastering a new range and technologies.

Changing the range of products becomes important factor, which determines the level of production costs. With excellent profitability, a shift in the assortment should be associated with improving the structure and increasing production efficiency. This can either increase or decrease production costs.

Classifying costs into variable and fixed has a number of advantages, which many enterprises actively use. In parallel with it, accounting and grouping of costs by cost is used.

Fixed costs are costs that do not change with changes in production volume. They are associated with fixed costs in each period of time, i.e. depend not on production volume, but on time. Fixed and variable costs add up to total costs.

Examples of fixed costs:

Rent.
Property taxes and similar payments.
Salaries of management personnel, security, etc.

Fixed costs are usually indirect costs from a product costing perspective. Those. they cannot be directly (without additional calculations) included in the cost certain type products, services. Or it is not economically feasible.

Fixed costs are constant only for the purposes of short-term analysis. In the long term, they change due to changes in the size of the enterprise, financial arrangements, rent and insurance deductions.

Because fixed costs do not depend on volume, the share of fixed costs in the cost of each unit of production will decrease as volume increases and increase as volume decreases. This, in turn, will lead to a decrease or increase in cost, respectively. At a certain volume, called the break-even point, the cost per unit of production will be such that revenue will only cover costs.

The break-even point in physical terms is 20 units of some products. With such a volume, profit (green line) is equal to 0. With a smaller volume (to the left), the enterprise’s activities are unprofitable, and with a larger volume (to the right), it is profitable.

Fixed-variable costs

Costs are usually divided into fixed and variable costs. Fixed costs are those costs that do not depend on the volume of production and sales, they are unchanged, and do not constitute the direct cost of products, goods, services. Variable costs are costs that constitute the direct cost of production, and their size directly depends on the volume of production and sales of products, goods or services. Fixed and variable costs, examples of them are very diverse, they depend on the types and areas of activity. Today we will try to present fixed and variable costs in more detail through examples.

Fixed costs include the following types:

Rent. The most striking example of fixed costs that occurs in any form entrepreneurial activity are rental payments. An entrepreneur, renting an office, workshop, warehouse, is forced to pay regular rental payments, regardless of how much he earned, sold goods or provided services. Even if he has not received a single ruble of income, he will still have to pay the rental price, otherwise the contract with him will be terminated and he will lose the rented space.
salaries of administrative staff, management, accounting, wages of support staff (system administrator, secretary, repair service, cleaner, etc.). The calculation and payment of such wages also does not depend in any way on sales volumes. This also includes the salary portion of sales managers, which is accrued and paid regardless of the sales manager’s performance. The percentage or bonus part will be classified as variable costs, since it directly depends on volumes and sales results. Examples of fixed costs include the salary portion of the wages of the main workers, which is paid regardless of the volume of products produced, or payments for forced downtime.
depreciation deductions. Accrued depreciation amounts are also a classic example of fixed costs.
payment for services related to the general management of the enterprise. This includes utility costs: payment for electricity, water, communication services and the Internet. Services of security organizations, bank services (cash and settlement services) are also examples of fixed expenses. Advertising agency services.
bank interest, interest on loans, discounts on bills.
tax payments, the tax base of which is static taxation objects: land tax, enterprise property tax, unified social tax paid on wages accrued on salaries, UTII - very good example fixed costs, various fees and charges for trade permits, environmental fees, transport tax.

It is not difficult to imagine examples of variable costs associated with the volume of production, sales of goods and services; these include:

Piecework wages for workers, the amount of which depends on the amount of products produced or services provided.
the cost of raw materials, materials and components used to produce products, the cost of purchased goods for subsequent resale.
the amount of interest paid to sales managers from the results of sales of goods, the amount of bonuses accrued to personnel based on the results of the enterprise’s activities.
amounts of taxes, the tax base of which is the volume of production and sales of products, goods: excise taxes, VAT, tax under the simplified tax system, unified social tax, paid on accrued premiums, interest on sales results.
the cost of services of third-party organizations, paid depending on sales volumes: services of transport companies for the transportation of products, services of intermediary organizations in the form of agency or commission fees, sales outsourcing services,
the cost of electricity, fuel, in manufacturing enterprises. These costs also depend on the volume of production or provision of services; the cost of electricity used in an office or administrative building, as well as the cost of fuel for cars used for administrative purposes, are considered fixed costs.

As we have already said, knowledge and understanding of the essence of fixed and variable costs is very important for competent management of a business and its profitability. Due to the fact that fixed costs do not depend on the volume of production and sales of goods, they are a certain burden for the entrepreneur. After all, the higher the fixed costs, the higher the break-even point, and this in turn increases the risks of the entrepreneur, since in order to cover the amount of large fixed costs, the entrepreneur must have a large volume of sales of products, goods or services. However, in conditions of fierce competition, it is very difficult to guarantee the constancy of the occupied market segment. This is achieved by increasing advertising and promotion costs, which are also fixed costs. It turns out to be a vicious circle. By increasing expenses on advertising and promotion, we thereby increase fixed costs, while at the same time we stimulate sales volume. The main thing here is that the efforts of the entrepreneur in the field of advertising are effective, otherwise the entrepreneur will suffer a loss.

This is especially important for small businesses, since the margin of safety of a small business entrepreneur is low and he has limited access to many financial instruments(credits, loans, third-party investors), especially for a novice entrepreneur who is just trying to develop his business. Therefore, for small businesses, you should try to use low-cost methods of business promotion, such as guerrilla marketing, non-standard advertising. It is necessary to try to reduce the level of fixed costs, especially at the initial stage of development.

Fixed production costs

Each enterprise, regardless of its size, uses certain resources in the course of economic and financial activities: labor, material, financial. These consumed resources are the costs of production. They are divided into fixed costs and variable costs. Without them, it is impossible to carry out business activities and make a profit. The division into variable and fixed costs allows you to competently and effectively make the most optimal management decisions, which helps to increase the profitability of the enterprise.

Fixed costs are all types of resources aimed at production and independent of its volume. They also do not depend on the number of services provided or goods sold. These costs are almost always the same throughout the year. Even if a company temporarily stops producing products or stops providing services, these expenses will not stop.

We can distinguish the following fixed costs inherent in almost any enterprise:

Wages of permanent employees of the enterprise (salaries);
- social insurance contributions;
- rent, leasing;
- tax deductions on the property of the enterprise;
- payment for services of various organizations (communications, security, advertising);
- depreciation charges calculated using the straight-line method.

Such expenses will always exist as long as the enterprise carries out its economic and financial activities. They exist regardless of whether it receives income or not.

Variable costs are expenses of an enterprise that change in proportion to the volume of commercial products produced. They are directly related to production volumes.

The main items of variable costs include:

Materials and raw materials necessary for production;
- piecework salary (according to tariff rates), percentage of remuneration for sales agents;
- the cost of commercial products purchased from other enterprises intended for resale.

The main idea behind variable costs is that when a business has income, it is possible that they will be incurred. The company spends part of its income on the purchase of raw materials, supplies, and goods. In this case, the money spent is transformed into liquid assets located in the warehouse. The company also pays interest to agents only on the income received.

This division into fixed costs and variables is necessary for full business management. It is used to calculate the “break-even point” of the enterprise. The lower the fixed costs, the lower it is. Reducing the share of such costs sharply reduces business risk.

The division of expenses into fixed and variable is widely used in the theory of microeconomics. It is also used in calculating the cost of production, to determine the share of specific types of expenses, since the enterprise benefits from reducing fixed costs. An increase in production volume reduces part of the fixed costs included in the cost of a unit of production, thereby increasing the profitability of production. This profit growth occurs due to the so-called “economy of scale”, that is, the more commercial products are produced, the lower its cost becomes.

In practice, the concept of semi-fixed costs is also often used. They represent a type of cost that is present during downtime, but their value can be changed depending on the time period chosen by the enterprise. This type of expense overlaps with indirect or overhead costs, which accompany the main production, but are not directly related to it.

Conditionally fixed costs

Conditionally fixed costs are costs that do not change or change slightly depending on changes in production volume. These include: depreciation of buildings and structures, costs of managing production and the enterprise as a whole, rent, etc.

Costs are usually divided into fixed and variable costs. This division is based on the economic meaning of the costs that an entrepreneur incurs in the process of his activities. Some costs - fixed costs do not depend on the volume of production and sales, others - variable costs directly depend on the volume of production and sales of products, goods, services. However, in real life, fixed and variable costs are not immutable; they constantly change in the process of business activity. Therefore, in economics they are usually considered as conditionally fixed and conditionally variable costs. In this material we try to give examples and explain why they are considered conditionally fixed and conditionally variable costs.

Conditionally fixed and conditionally variable costs: definition.

Conventionally, fixed costs are costs that are not related to the volume of production and sales of products, goods, services, and in the process of business activity change both in quantity and quality. Fixed costs can turn into variable costs.

Conventionally, variable costs are costs that are directly related to the volume of production and sales of products, changing during the life of the entrepreneur’s activity both in quantity and in their quality and composition.

Conditionally fixed and conditionally variable costs: examples of conditionally fixed costs.

Fixed costs in the form of rent when renting an office may change during the course of the entrepreneur’s activities. They can increase or decrease quantitatively - the rental price rises or falls, or the rented area changes. They can also change structurally: the entrepreneur bought out a rented office or bought his premises in another location. Quantitatively, they may decrease, because now the entrepreneur is charged depreciation, and it is lower than rental payments. They may also change structurally: to purchase his premises, the entrepreneur took out a loan, and now the total amount of fixed costs for maintaining the premises may remain the same, and the structure is partly depreciation, and partly interest on the loan.

The accounting department's salaries are a fixed cost. Over time, the volume of wage costs may increase (expansion of staff due to an increase in operations, types of activities), or may decrease - transfer of responsibility accounting specialized organization for outsourcing.

Tax payments. There are taxes that also apply to fixed costs: property tax, unified social tax on salaries of administrative personnel, UTII. The amounts of these taxes may also change during the course of business. The amount of property tax may increase due to an increase in the value of property (purchase of new property, revaluation of value), due to an increase in tax rates. It may also decrease (sale of property, revaluation of value). The amounts of other taxes related to fixed costs may also change. The transition to outsourcing accounting services does not imply the calculation of wages, therefore the unified social tax will also not be accrued.

Fixed costs can be changed by converting them into variables. For example, when an enterprise produces products and produces some of the components in-house. When the volume of orders decreases, it is more profitable to find a third-party manufacturer and receive components from it, thereby eliminating part of the fixed costs in the form of depreciation of equipment, its maintenance, depreciation of premises, selling it or leasing it. In this case, the cost of supplied components will be considered completely variable costs.

Conditionally fixed and conditionally variable costs: examples of conditionally variable costs:

1. Variable costs in the form of material costs in the production of products (raw materials, supplies, components) are considered conditionally variable costs. They also change during the course of activity. Changes can occur: - due to changes in prices (increase in supplier prices due to inflation, decrease in prices due to changes in suppliers with more favorable conditions), - due to changes in technology (use of less expensive types of raw materials, use of cheap substitutes), - due to changes in production itself (previously purchased components on the outside, the enterprise can begin to produce on its own. In this case, part of the variable costs will turn into constants in the form of depreciation of equipment, wages of foremen and salaries of workers, part of the costs will remain variable in the form of costs of raw materials and materials.
2. Variable costs in the form of piecework wages. Such costs change in quantity, as well as in connection with changes in payment terms: increasing or decreasing standards, applying new payments that stimulate labor productivity. Increase or reduction of personnel, etc. That is, the size of variable costs changes throughout the life of the enterprise.
3. Variable costs in the form of interest payments to sales managers. Such costs are also constantly in a state of change, since the amount of remuneration changes depending on sales volumes. Changes may also concern the terms of payment of remuneration (interest). When a certain sales volume is reached, percentages may increase or decrease, as a result, variable costs will change both quantitatively and qualitatively.

The given examples of conditionally fixed and conditionally variable costs clearly show why costs are considered to be conditional. In the process of entrepreneurial activity, the entrepreneur tries to influence profits: reduce costs and increase income, at the same time the market and external environment also influences the entrepreneur. As a result of such activities, costs constantly change under the influence of various factors, which is why they are considered to be conditionally constant and conditionally variable costs.

Amount of fixed costs

The amount of fixed and variable costs, in turn, depends on the level of resource intensity and changes in the cost of material resources due to inflation.

Gross costs are the sum of fixed and variable costs.

It is very important to accurately determine the amount of fixed and variable costs, since the results of the analysis largely depend on this.

The selective method allows you to more accurately determine the amount of fixed and variable costs, but it is more labor-intensive compared to those discussed above. However, in the conditions of modern technologies for processing economic information, this process is simplified if we provide for the division of costs into constant and variable in computer programs and in primary documents.

What exactly does information about the amount of fixed and variable costs give the manager? This information is most useful in the so-called marginal approach, which is used in preparing the income statement.

Total (gross) costs are the sum of fixed and variable costs.

The break-even point corresponds to the sales volume at which revenue is equal to the sum of fixed and variable costs for a given production volume and utilization rate production capacity. For example, you can calculate the occupancy rate in a hotel or airplane that corresponds to the break-even point.

To effectively manage the process of forming product costs, it is very important to correctly determine the amount of fixed and variable costs.

Fixed total costs

Fixed costs are costs that do not change directly with changes in production volume, i.e. are not a function of production volume. Examples of such costs include rent, property taxes and similar payments, depreciation, etc.

From an economist's point of view, overhead costs are synonymous with fixed costs. For an accountant, this term means indirect costs. If we combine all the firm's fixed costs together, we get total fixed costs.

Variable costs are a function of production volume. Examples of variable costs are costs for materials, energy, labor, components, etc. Variable costs are a continuous function of production volume. If we combine all the variable costs of a company together, we get total variable costs.

As a result, combining total variables, TVC and total fixed costs, TFC we obtain the total costs of the company, TC and this can be expressed by the formula:

Thus, to obtain the functional dependence of total costs on production volume, it is necessary to calculate TC values ​​that correspond to a number of production volume values.

In the analysis, total variable cost is the only part of total cost that changes, any change in the amount will result from and be equal to the change in total variable cost. This change due to a change in output is called marginal cost.

Marginal cost represents the change in total costs caused by a unit change in output and is equal to the change in total variable costs.

Amount of fixed costs

This information is the starting point for determining the break-even point. If you do not know which costs are variable and which are constant in your enterprise, this can be determined by financial statements, to do this, you need to look at the accounting by expense items for a certain period, for example, a year on a monthly basis.

Fixed costs are labor costs (if these are salaries and not piecework and if you did not change your staffing during this period), rent, return on investment, insurance (if any), advertising, any other limited expenses, including purchases of raw materials, depreciation.

Variable costs will change with growth business activity enterprise (or with the growth of production), these may be the costs of production, modernization or business expansion. It all depends on the specifics of your business.

As a first step, you will need to review and group by expense items the accounts that are the main accumulators of expenses:

20 "Main production",
26 "General business expenses",
23 "Auxiliary production",
28 “Defects in production”, possibly 25 count, etc.

Each accountant does accounting differently; it is better to review all the accounts that he uses to reflect expenses. Then break it down by expense item and make reports for each month throughout the year.

Constant costs include costs whose value does not change or changes slightly with changes in production volume. These include general business expenses, etc.

Variables are costs whose value changes with changes in production volume. These include the consumption of raw materials, fuel and energy for technological purposes, wages of production workers, etc.

Some costs are mixed because they have both variable and fixed components. These are sometimes called semi-variable and semi-fixed costs. For example, the monthly telephone fee includes constant amount subscription fee and a variable part, which depends on the number and duration of long-distance and international telephone calls. Therefore, when accounting for costs, they must be clearly distinguished between fixed and variable costs.

The division of costs into fixed and variable is of great importance for planning, accounting and analysis of product costs. Fixed costs, while remaining relatively unchanged in absolute value, with production growth become an important factor in reducing production costs, since their value decreases per unit of production. When managing fixed costs, it should be borne in mind that their high level is determined to a large extent by industry characteristics, which determine different levels of capital intensity of products, differentiation of the level of mechanization and automation. In addition, fixed costs are less amenable to rapid change. Despite objective limitations, every enterprise has opportunities to reduce the amount and share of fixed costs. Such reserves include: reduction of administrative and management costs in the event of unfavorable commodity market conditions; sale of unused equipment and intangible assets; use of leasing and rental of equipment; reduction of utility bills, etc.

Variable costs increase in direct proportion to the growth of production, but calculated per unit of production, they represent a constant value. When managing variable costs, the main task is to save them. Savings on these costs can be achieved through the implementation of organizational and technical measures that ensure their reduction per unit of output - increasing labor productivity and thereby reducing the number of production workers; reduction of inventories of raw materials, supplies and finished products during periods of unfavorable market conditions. In addition, this grouping of costs can be used in analyzing and forecasting break-even production and, ultimately, in choosing the economic policy of an enterprise.

Fixed costs do not depend on the size of production. Their value is unchanged because they are connected with the very existence of the enterprise and must be paid, even if the enterprise does not produce anything. These include: rent, costs of maintaining management personnel, depreciation charges for buildings and structures. These costs are sometimes called indirect or overhead.

Variable costs depend on the quantity of products produced, since they consist of the costs of raw materials, materials, labor, energy and other consumable production resources.

Calculation of fixed costs

In production, there are costs that remain the same even with hundreds or tens of thousands of dollars in profit. They do not depend on the volume of products produced. These are called fixed costs. How to calculate fixed costs?

Just follow these simple step-by-step tips and you will be on the right track in your business.

Determine the formula for calculating fixed costs. It calculates the fixed costs of all organizations. The formula will be equal to the ratio of all fixed expenses to the total cost of works and services sold, multiplied by the basic income from the sale of works and services.

Calculate all fixed expenses. These include: advertising costs, both internal and external; administrative and management expenses, i.e. salaries of top managers, maintenance of company cars, maintenance of accounting, marketing departments, etc., costs of depreciation of fixed assets, costs of using various information databases, for example, postal or accounting.

Having done this, move on to the next steps.

Count in non-current assets deductions for depreciation of fixed assets, such as land, capital costs for land improvement, buildings, structures, transmission devices, machinery and equipment, etc. Don't forget about library collections, natural resources, rental items, as well as capital investments in facilities that have not been put into operation.

Calculate the entire cost of completed work and services. This will include revenue from the main sale or from services provided, for example, a hairdresser and work performed, for example, construction organizations.

Calculate the basic income from the sale of works and services. Basic income is the conditional profitability for the month in value terms per unit of physical indicator. Please note that services classified as “domestic” have a single physical indicator, while services of a “non-domestic” nature, for example, housing rental and passenger transportation, have their own physical indicators.

Substitute the obtained data into the formula and get fixed costs.

Fixed costs of the company

The variety of ways to make a profit for enterprises in any industry of production and sale of services, on the one hand, creates unlimited opportunities for the development of a particular business, on the other hand, each type of activity has a certain threshold of efficiency, determined by break-even.

In turn, the amount of revenue that guarantees profit directly depends on the total costs of production and sales of products.

For the purposes of analyzing the break-even of activities, the total expenses of an enterprise are usually divided into two main categories:

Variables are costs, the amount of which directly depends on the volume of production and sale of services (depending on the chosen direction of the company’s operation), i.e., in fact, they are directly proportional to any fluctuations in the volume of core activities;
- fixed costs are costs, the amount of which does not change in the medium term (a year or more) and does not depend on the volume of the company’s core activities, i.e. they will exist even if the activity is suspended or terminated.

Having considered fixed costs using the example of an enterprise, it is easier to understand their essence and interdependence with the volume of core activities.

So, they include the following expense items:

Depreciation charges on the company's fixed assets;
- rent, tax payments to the budget, contributions to extra-budgetary funds;
- bank expenses for servicing current accounts, loans of the organization;
- payroll fund for administrative and managerial personnel;
- other general business expenses necessary to ensure the normal functioning of the enterprise.

Thus, the essence of fixed costs of any organization comes down to their functional necessity for the implementation of activities. They can and most often change over time, but the reason for this is external factors (changes in the tax burden, adjustments to the terms of service in the bank, renegotiation of contracts with service organizations, changes in tariffs for public utilities and so on.).

Internal factors influencing changes in fixed costs are a significant change in corporate policy, the personnel remuneration system, a significant change in the volume or direction of the company’s activities (not just a change in volume, but a radical transition to a new level).

For the purposes of accounting and analysis, enterprise expenses are usually divided into constant and variable, using the following methods:

Based on experience and knowledge, through a management decision, a certain category is assigned to expenses. This method is good when the company is just starting its activities and there are simply no other ways to attribute costs. It is characterized by a high level of subjectivity and requires revision in the long term.
- Based on the data of the analytical work carried out to search, evaluate and differentiate all expenses by category based on their behavior under the influence of the factor of changes in the volume of core activities. It is the most acceptable, since this method is more objective.

Fixed costs are calculated using the formula:

POST = Salary + Rent + Banking services + Depreciation + Taxes + General household services,
where: POSTz – fixed costs;
Salary – costs of salaries of administrative and managerial personnel;
Rent – ​​rental expenses;
Banking services – banking services;
General expenses - other general expenses.

To find the average fixed cost per unit of output, you must use the following formula:

SrPOSTz = POSTz / Q,
where: Q – volume of products (its quantity).

The analysis of these indicators must be carried out in dynamics, assessing the retrospective values ​​at different periods of time, including with a joint analysis of other economic indicators. This will allow you to see the interconnection of processes characteristic of the enterprise, which means you can get a cost management tool in the future.

Analysis of fixed costs, carried out both on an operational basis and for the purpose of strategic planning, allows you to assess the capabilities of an enterprise to improve the efficiency of its activities. This is the key economic meaning of this category. The simplest and most accessible way to analyze the performance of a company is to evaluate the break-even point indicator, including in dynamics.

To carry out calculations, data on the amount of fixed costs, unit price and average variable costs is required:

Tb = POSTz / (C1 – SrPEREMz),
where: Тb – break-even point;
POSTz – constant expenses;
Ц1 – price per unit. products;
Avperemz – average variable costs per unit of production.

The break-even point is an indicator that allows you to see the boundary beyond which the company’s activities begin to make a profit, as well as analyze the dynamics of the impact of changes in costs on the production volume and profit of the organization. A decrease in the break-even point with constant variable costs is assessed positively; this signals an increase in the efficiency of the enterprise’s expenses. The growth of the indicator should be assessed positively when it occurs against the background of an increase in sales volumes, i.e. it indicates an increase and expansion of the scope of activity.

Thus, accounting, analysis and control of fixed costs, reducing their load per unit of production are mandatory measures necessary for every enterprise to achieve competent management of resources and capital.

Fixed production costs

The transfer price is the price of products or services provided by one division (segment) of a large decentralized organization to another division of the same organization. These prices are often seen as a surrogate for the market price in internal operations companies that include at least one profit center or investment center.

Variable expenses include those expenses that are immediately charged to account 20 “Main production” or written off at the end of the reporting period to account 20 from account 25 “General production expenses”, on which they accumulated during the month.

Fixed costs are expenses that are relatively stable (change slightly) with fluctuations in production volumes and services (for example, depreciation, rent, etc.).

Fixed costs per unit of services change inversely with changes in the volume of services provided. These costs in accounting include general business expenses that accumulate in the account of the same name during the month. Depending on the method of accounting for costs, they can be written off at the end of the month to account 20 “Main production”, on which the cost of the tourism product is formed, or, bypassing account 20, they can be immediately written off for the sale of services. In the latter case, the gross revenue from the sale of services is reduced in full by the amount of fixed (general business) expenses.

An important aspect analysis of fixed costs is their division into useful and useless (idle), which is associated with an abrupt change in most production resources.

Thus, fixed costs can be represented as the sum of costs - useful and useless, not used in the production process:

Zconst = Zuseful + Zuseless

When dividing costs into fixed and variable, it is necessary to take into account the fact that costs of the same type can behave differently. Exists a large number of costs that are variable in a certain decision-making situation, but may be constant in another.

It makes no sense to divide expenses into fixed and variable according to their essence in an abstract form, because the truth is always concrete.

The nature of cost behavior (variable or fixed) is influenced by the following factors:

1. time factor, i.e. the duration of the period under consideration; Thus, over a long period of time, all costs become variable;
2. the production situation in which decisions are made. For example, an enterprise pays interest on borrowed capital; in a normal situation, this interest is classified as a fixed cost, since its value does not depend on the volume of services. These same percentages become variable when the production situation for making a decision changes (for example, in the event of a plant closure);
3. insufficient divisibility of production factors. The consequence of this factor is the fact that many costs increase with an increase in the volume of services provided not gradually, but spasmodically, stepwise. These costs are constant for a certain range of production volumes, then they rise sharply and remain constant again for a certain interval.

Increase in fixed costs

A key decision for an organization's manager is whether or not to recommend an increase in fixed costs. We are also talking about additional fixed costs, for example, the creation of a new overhead item, which will constantly increase the company's cost base.

Adding such costs may be necessary if existing personnel are simply unable to meet the demands of existing sales and production levels and require assistance. However, the director must consider this decision in terms of its impact on profitability.

One of the best ways to do this is to analyze the return on additional fixed costs. This analysis often shows that profits peak just before an increase in fixed costs, since it may require significant additional sales, compensating for such an increase.

There are several key factors that a director needs to consider when thinking through this decision. One of them is the sales volume at which profit will correspond to the level at which it was immediately before the increase in fixed costs.

Another factor follows from the previous point and is to determine the maximum sales level that will keep the equipment in the best condition.

However, another factor to consider is the stability of new sales needed to cover the increase in fixed costs. A clear view of the market served by the company, the level of competition, potential price wars and other similar factors should all be carefully analyzed before deciding to increase fixed costs.

However, most increments are significantly more modest, with small additional amounts placing minimal incremental pressure on financial results.

However, these makeweights gradually eat into profits over time. To gain control over them, the director must have a robust mechanism for approving any increase in fixed costs that occurs outside the standard budget process.

For costs included in the budget, the director has more time to analyze why the increase is needed, how increased efficiency would help avoid these costs, whether it would be better to outsource rather than bear the additional costs themselves, etc.

The decision to increase fixed costs is one of the most important for the company in terms of ongoing production activities and therefore deserves a significant share of the working time of the director of the company.

Change in fixed costs

In practice, the change in the amount of fixed expenses occurs not so much under the influence internal factors, which can be regulated as much as under the influence of external factors: increasing prices and tariffs for goods and services consumed in the management process; revaluation of fixed assets; changes in tax rates, depreciation rates, rents, etc. The influence of external factors can be planned within a very narrow period of time. Therefore, financial managers of enterprises must quickly monitor cost fluctuations and make management decisions that prevent negative impact external factors on the cost of production, and ultimately on the profit of the enterprise.

By changing the relationship between fixed and variable costs within the capabilities of the enterprise, it is possible to solve the issue of obtaining the optimal amount of profit.

This dependence is called the production leverage effect, and the greater the share of fixed costs in the structure of total costs, the stronger force production leverage.

Consequently, to achieve optimal financial results, financial managers must participate together with other services not only in planning the amount of costs, but also in determining their rational structure.

Cost planning should be preceded by a thorough and comprehensive cost analysis, during which the influence on the cost of production of the main technical and economic factors in the base period is established.

Special attention should be focused on identifying the magnitude and causes of costs caused by improper organization of the production process: excess consumption of raw materials, materials, energy, additional payments to workers for overtime work, losses from equipment downtime, accidents, defects, unnecessary costs caused by irrational economic relations in the supply of raw materials and materials, violations of technological and labor discipline, etc. At the same time, internal production reserves are identified in the field of improving the organization of production and labor, introducing new technology and technologies with an assessment of their economic efficiency.

Cost planning by factors is used in the development of current and long-term plans for the cost of products, works, and services.

The essence of factor-based planning is that, through a series of special calculations, it is established how the level of costs that has developed in the base year should change under the influence of changes in the technical and economic conditions of production planned for the planned year.

The advantage of the method: reduced composition and volume of required output information; high degree validity of the plan; a significant reduction in the complexity of calculations, both during manual and automated data processing; highlighting in the total change in cost the share of participation of each planned event and other planned changes in production conditions.

Disadvantage of the method: the inability to obtain all the necessary planned cost calculations.

The planned cost is calculated in the following sequence:

The cost of marketable products for the planned year is determined based on the actual level of costs of the base year;
- savings are calculated in the planned year, due to changes in production, technical and economic conditions of business (measures taken to introduce new equipment, technology, improve the organization of production and labor, etc.) in comparison with the conditions adopted for the base year;
- from the cost of marketable products of the planned year, calculated according to the level of costs of the base year, the total amount of savings is subtracted and the cost of marketable products of the planned year is determined (in prices comparable to the base year);
- the level of costs per 1 ruble is calculated. commercial products in the planned year and reducing these costs compared to the actual level of costs in the base year.

A reduction in production costs in the planning period is achieved as a result of pre-calculated savings from:

Application of resource-saving technology that ensures savings in materials, fuel and energy, and releases workers;
- strict adherence to technological discipline, leading to a reduction in losses from defects;
- usage technological equipment in economically efficient areas and regimes;
- balanced operation of production facilities, leading to a reduction in the cost of fixed assets, work in progress and product inventories;
- developing an optimal strategy for the technical development of the enterprise, ensuring a rational level of costs for creating the technical potential of the enterprise;
- increasing the organizational level of production, entailing a reduction in losses of working time, the duration of the production cycle and, as a consequence, a reduction in production costs and sizes working capital enterprises;
- implementation effective systems intra-production economic relations that contribute to saving all types of resources and improving product quality;
- rationalization of the organizational structure of the production management system, which means reducing management costs and increasing its efficiency.

When determining savings due to the action of all technical and economic factors (except for changes in the volume of production and the use of fixed assets), only the reduction in variable costs is taken into account.

Fixed Cost Analysis

Some experts quite reasonably believe that the use of this method is appropriate when assessing the efficiency of production of products for the entire enterprise. In practice, especially with a small range of production and sales and a simple structure of overhead costs, they usually do not resort to separate accounting of fixed costs.

Basic assumptions when considering this method are as follows:

Variable costs are localized by product;
fixed costs are considered as a total for the enterprise as a whole;
marginal profit is estimated for each product;
profitability, as well as other financial indicators (for example, safety margins) are assessed for the entire enterprise as a whole.

This approach has obvious advantages: ease of calculation and no need to collect a large amount of data. The disadvantage of this approach is the impossibility of comparative assessment of profitability by certain species products.

Example 1

The manufacturing company produces chemicals for automobile use. For simplicity of calculations, we will limit ourselves to three product names.

Having orders for three products in their portfolio, the company's managers decided to analyze the profitability of each type of product. At first, they used the first approach, that is, they did not divide indirect costs by elements of the product portfolio. Having identified the main variable costs, they obtained the following results for a comparative analysis of product profitability.

A feature of the order portfolio is its lack of balance. Indeed, glass cleaner ranks second in terms of profitability (in %) among all products. And at the same time, this type of product ranks last in terms of sales volume (revenue). As a result, the profitability of the sales portfolio as a whole (10%) leaves much to be desired. Therefore, to increase the efficiency of production and sales, company managers should focus their efforts on “promoting” this product.

Next, we will evaluate the company’s financial stability to changes in external economic conditions. In this sense an important condition successful work enterprise is a safety margin. The margin of safety, or financial strength, shows how much sales (production) of products can be reduced without incurring losses. The excess of real production over the profitability threshold is the margin of financial strength of the enterprise. This indicator is defined as the difference between the planned sales volume and the break-even point of the business (in relative terms). The higher this indicator, the safer the entrepreneur feels in the face of the threat of negative changes (for example, in the event of a drop in revenue or an increase in costs). The break-even point is usually presented in physical (units of production) or monetary terms. It can be stated with certainty that the lower the break-even point, the more efficiently the enterprise operates in terms of generating operating profit. Let's calculate the break-even point for the entire production and sales portfolio. The break-even point of a business is easy to find if the financial result from product sales is equal to zero.

To do this, the marginal profit (MP) from sales is equated to fixed costs (Zpost):

MP = Zpost.

In this case, the company will have neither profit nor loss.

Then the critical sales volume or critical revenue (Vkr), at which there is neither profit nor loss, can be found from the following ratio:

(MP / Vpr) x Vkr = Zdc.

The meaning of this formula is that when current sales revenue (Vpr) drops to its critical level (Vkr), their values ​​will decrease.

In this case, there will be no profit (MP = Zpost). Next, we write this formula in the following form:

MP / Vpr = Zpost / Vkr.

In this formula, the first part of the equality is an expression for determining the profitability of the enterprise's products as a whole based on marginal profit.

Let's denote it by the indicator:

Hence, the critical revenue (or break-even point) (Vkr) in monetary terms is equal to: 800 thousand rubles. / 0.42 = 1905 thousand rubles.

The safety margin factor (Kzb) will be: [(2500 – 1905) / 2500] x 100% = (595 / 2500) x 100% = 23.8%.

In its meaning, KZB characterizes the break-even point in monetary terms. This is the minimum income at which all costs are fully recouped, while the profit is zero. It is believed that for normal operation of an enterprise it is quite enough if the current sales volume (Vpr) exceeds its critical level (Vkr) by at least 20%. IN in this case this figure exceeds the recommended value, but is almost on the verge.

It would seem that everything is clear: on the one hand, in the general case, we have an unbalanced structure of production and sales of the order portfolio for total products, on the other hand, there are relatively low indicators of profitability and safety margin for the company’s products as a whole. In addition, it appears that we have rather meager information about the behavior of fixed costs in relation to each type of product. However, the presented picture may change radically if we take into account the distribution of fixed costs by type of product.

Specific fixed costs

When analyzing break-even, not only a graphical, but also a mathematical approach is used to reflect the processing of initial information about the costs and results of the production and commercial activities of the enterprise. When developing and applying mathematical formulas, it should be borne in mind that fixed costs are a constant aggregate (total, total) value for the entire volume of production, and variables reflect costs per unit of production and change depending on changes in production volume, which means that the specific profit in the calculation per unit of output will also vary depending on the level of production.

The mathematical relationship between profit, production volume and costs will be as follows:

NP = pq – (c + vq); Formula 1
NP – net profit;
q - number of product units sold, natural units;
p – unit sales price, DE;
v – variable costs per unit of production, DE;
c – total, fixed costs, DE.

Factors that influence net profit include:

Volume of produced or products sold;
- unit price of products sold;
- variable costs for production, sales and management;
- fixed costs associated with production, sales and management of the enterprise.

First of all, it is necessary to determine the volume of production and sales at which the enterprise ensures reimbursement of all costs.

The break-even point is the volume of production at which sales revenue covers total costs. At this point, revenue does not allow the company to make a profit, but there are no losses either.

In accordance with which, according to formula 1, the break-even point will be at the production level at which:

C + vq = pq – NP formula 2
since NP = O,
pq = c + vq formula 3

To determine the break-even point, you can also use the gross or marginal profit (MR) indicator. There are various approaches to determining this indicator: “the difference between the selling price and specific variable costs is called gross profit per unit of production” or “variable costs or partial cost of production (PC) are subtracted from the sales price of products and the marginal profit is determined.” In all cases, its calculation and use are based on the fact that in the expected production range the product price and unit variable costs are constant. Consequently, the difference between the selling price and variable costs per unit of production must be constant. To ensure break-even production, this difference, or marginal profit, must cover fixed costs.

Unit price = Specific constants + Specific variables

Product costs costs

Or at the break-even point, marginal profit is equal to specific fixed costs, since in this case:

Unit price – Specific variables = Specific constants

Product costs costs

Subject to this rule, each unit of production brings neither profit nor loss.

Break-even point = Total fixed costs

Specific fixed costs

Break-even point = Total fixed costs

Share of fixed costs

Most meaningful information for analysis it gives the division of costs into variable and constant components. It is convenient to describe the cost structure by specifying the share of fixed costs in the cost of products sold.

The separation of fixed and variable costs allows you to conduct a break-even analysis, assess the dynamics of changes in prices for products sold and materials consumed in the production process (calculate the price coefficient), and determine the causes of losses from core activities (increase in variable or fixed costs).

From the general list of additional data, information on the cost structure has highest value.

Form 5-z “Information on the costs of production and sales of products (works, services)” can be a source of information about the share of fixed costs in the cost price. However, information in this form may require additional processing, for example, dividing the costs of materials, fuel, energy into variable and constant components; separating the share of costs for sold products from the total cost of the period.

One of the options for determining the amount of fixed costs for a period is to use information from statements (estimates) of overhead costs for the period for individual workshops and production facilities of the enterprise.

Often, enterprises have similar reporting forms - statements of general economic, general shop expenses and expenses for the maintenance and operation of equipment, which are prepared by each of the workshops (productions, services) of the organization.

Based on the statements for each workshop (service, production), fixed costs are allocated, written off to the cost of production for a given period. By summing them up, we can estimate the total amount of fixed costs of the enterprise included in the cost of manufactured products in this period. Knowing what share of the products produced was sold, it is possible to determine the amount of fixed costs included in the cost of products sold.

If statements of general shop, general plant expenses, etc. contain cost elements that are essentially variable, additional processing of these documents is required. For example, statements of general shop expenses may contain the wages of auxiliary workers, determined on a piece-rate basis.

In this case, the wages of auxiliary workers are a variable value, and it must be attributed to the variable costs of the period.

There are several classifications of costs. Most often, costs are divided into fixed and variable. We will tell you what applies to each type of cost and give examples.

What is this article about?:

Cost classification

All costs of an enterprise, according to their dependence on production volumes, can be divided into constant and variable.

Fixed costs are company expenses that do not depend on the volume of production, sales, etc. These are costs that are necessary for the normal operation of the company. For example, rent. No matter how many goods the store sells, rent is a constant amount per month.

Variable costs, on the contrary, depend on the volume of production. For example, this is the salary of salespeople, which is expressed as a percentage of sales. The more sales a company has, the more sales.

Fixed costs per unit of production decrease with an increase in production volume, and, on the contrary, increase with a decrease in sales rates. Variable costs always remain the same per unit of product.

Economists call such costs conditionally fixed and conditionally variable. For example, rent cannot be indefinitely independent of production volume. All the same, at some point the production area will not be enough and more premises will be required.

That is, we can say that semi-variable costs are directly related to the main activity, while semi-fixed costs are more related to the activities of the enterprise as a whole, to its functioning.

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How it will help: contains illustrative examples constructing classifiers of objects, media and cost items.

Fixed costs

Conditionally fixed costs include those whose absolute value does not change significantly when the volume of output changes. That is, these costs arise even when the organization is idle. These are general business and production expenses. Such expenses will always exist as long as the enterprise carries out its economic and financial activities. They exist regardless of whether it receives income or not.

Even if an organization’s production volume does not change significantly, fixed costs can still change. Firstly, production technology is changing - it is necessary to purchase new equipment, train personnel, etc.

What is included in fixed costs (examples)

1. Salary of management personnel: chief accountant, financial director, general director etc. The salaries of these employees are most often salary. Of course, twice a month the employees receive this money regardless of how efficiently the organization operates and whether the founders make a profit ( ).

2. Company insurance premiums from the salary of management personnel. These are mandatory payments from salary. As a general rule, contributions are 30 percent + contributions to the Social Insurance Fund for industrial and professional accidents. diseases.

3. Rent and utilities. Rental expenses do not depend in any way on the company’s profit and revenue. You are required to transfer money to the landlord monthly. If the company does not comply with this condition of the lease agreement, the owner of the premises may terminate the agreement. Then there is a possibility that the business will need to be closed for some time.

4. Credit and leasing payments . If necessary, the company borrows money from the bank. Payments to the credit institution are required every month. That is, regardless of whether the company was profitable or at a loss.

5. Spending on security. Such expenses depend on the area of ​​protected premises, the level of security, etc. But they do not depend on the volume of production.

6. Costs of advertising and product promotion. Almost every company spends money on promoting a product. Indirectly, there is a relationship between advertising and sales volume, and, accordingly, production. But it is believed that these are independent quantities from each other.

The question often arises: is depreciation a fixed or variable cost? It is believed that they are permanent. After all, the company charges depreciation every month, regardless of whether it received income or not.

Variable costs

This is a company's expenses, which are directly dependent on production volume. For example, the cost of goods. The more a company sells, the more products it purchases.

Most often, variable costs arise when a company generates revenue. After all, the company spends part of the income received on the purchase of goods, raw materials and supplies for the manufacture of products, etc.

What refers to variable costs (examples)

1. Costs of goods for resale. There is a direct relationship here: the greater the company’s sales volumes, the more goods it needs to purchase.
2. Piece-rate part of the remuneration of sellers. Most often, sales managers' salaries consist of two parts - salary and percentage of sales. Interest is a variable cost because it directly depends on sales volume.
3. Income taxes: income tax, simplified tax, etc. These payments directly depend on the profit received. If a company has no income, then it will not pay such taxes.

Why divide costs into fixed and variable?

Businesses separate fixed and variable costs to analyze performance. Based on the values ​​of these costs, the break-even point is determined. It is also called coverage point, critical production point, etc. This is a situation when a company operates “at zero” - that is, income covers all its expenses - fixed and variable.

Revenue = Fixed expenses + Total variable expenses

The higher the fixed costs, the higher the company's break-even point. This means that you need to sell more goods in order to operate at least without a loss.

Price × Volume = Fixed costs + Variable costs per unit × Volume

Volume = Fixed Costs / (Price – Variable Costs per Unit)

where volume is the break-even sales volume.

By calculating this figure, a company can figure out how much it needs to sell to start making a profit.

Companies also calculate marginal income - the difference between revenue and variable costs. Marginal income shows how much the organization covers fixed costs.

Variable and fixed costs are the two main types of costs. Each of them is determined depending on whether the resulting costs change in response to fluctuations in the selected cost type.

Variable costs- these are costs, the size of which changes in proportion to changes in the volume of production. Variable costs include: raw materials and supplies, wages of production workers, purchased products and semi-finished products, fuel and electricity for production needs, etc. In addition to direct production costs Some types of indirect costs are considered variable, such as: costs of tools, auxiliary materials, etc. Per unit of production, variable costs remain constant, despite changes in production volume.

Example: With a production volume of 1000 rubles. with a cost per unit of production of 10 rubles, variable costs amounted to 300 rubles, that is, based on the cost of a unit of production they amounted to 6 rubles. (300 rub. / 100 pcs. = 3 rub.). As a result of doubling production volume, variable costs increased to 600 rubles, but calculated on the cost of a unit of production they still amount to 6 rubles. (600 rub. / 200 pcs. = 3 rub.).

Fixed costs- costs, the value of which almost does not depend on changes in the volume of production. Fixed costs include: salaries of management personnel, communication services, depreciation of fixed assets, rental payments, etc. Per unit of production, fixed costs change in parallel with changes in production volume.

Example: With a production volume of 1000 rubles. with a cost per unit of production of 10 rubles, fixed costs amounted to 200 rubles, that is, based on the cost of a unit of production they amounted to 2 rubles. (200 rub. / 100 pcs. = 2 rub.). As a result of doubling production volume, fixed costs remained at the same level, but based on the cost of a unit of production they now amount to 1 rub. (2000 rub. / 200 pcs. = 1 rub.).

At the same time, while remaining independent of changes in production volume, fixed costs can change under the influence of other (often external) factors, such as rising prices, etc. However, such changes usually do not have a noticeable impact on the amount of general business expenses, therefore, when planning, in accounting and control, general business expenses are accepted as constant. It should also be noted that some of the general expenses may still vary depending on the volume of production. Thus, as a result of an increase in production volume, the salaries of managers and their technical equipment (corporate communications, transport, etc.) may increase.

Cost price- the initial cost of the costs incurred by the enterprise for the production of a unit of product.

Price- the monetary equivalent of all types of costs including some types of variable costs.

Price- the market equivalent of the generally accepted cost of the product offered.

Production costs- these are expenses, monetary expenditures that must be made to create. For (the company) they act as payment for purchased goods.

Private and public costs

Costs can be viewed from different perspectives. If they are examined from the point of view of an individual firm (individual manufacturer), we're talking about about private costs. If costs are analyzed from the point of view of society as a whole, then, as a consequence, there arises the need to take into account social costs.

Let us clarify the concept of external effects. In market conditions, a special purchase and sale relationship arises between the seller and the buyer. At the same time, relationships arise that are not mediated by the commodity form, but have a direct impact on people’s well-being (positive and negative external effects). An example of positive external effects is expenses for R&D or training of specialists; an example of a negative external effect is compensation for damage from environmental pollution.

Social and private costs coincide only if there are no external effects, or if their total effect is equal to zero.

Social costs = Private costs + Externalities

Fixed Variables and Total Costs

Fixed costs- this is a type of cost that an enterprise incurs within one. Determined by the enterprise independently. All these costs will be typical for all product production cycles.

Variable costs- these are types of costs that are transferred to the finished product in full.

General costs- those costs incurred by the enterprise during one stage of production.

General = Constants + Variables

Opportunity Cost

Accounting and economic costs

Accounting costs- this is the cost of the resources used by the company in the actual prices of their acquisition.

Accounting costs = Explicit costs

Economic costs- this is the cost of other benefits (goods and services) that could be obtained with the most profitable possible alternative use of these resources.

Opportunity (economic) costs = Explicit costs + Implicit costs

These two types of costs (accounting and economic) may or may not coincide with each other.

If resources are purchased freely competitive market, then the actual equilibrium market price paid for their acquisition is the price of the best alternative (if this were not so, the resource would go to another buyer).

If resource prices are not equal to equilibrium due to market imperfections or government intervention, then actual prices may not reflect the cost of the best rejected alternative and may be higher or lower than opportunity costs.

Explicit and implicit costs

From the division of costs into alternative and accounting costs follows the classification of costs into explicit and implicit.

Explicit costs are determined by the amount of expenses for paying for external resources, i.e. resources not owned by the firm. For example, raw materials, materials, fuel, work force etc. Implicit costs are determined by the cost internal resources, i.e. resources owned by the firm.

No example explicit costs for an entrepreneur there may be a salary that he could receive as an employee. For the owner of capital property (machinery, equipment, buildings, etc.), previously incurred expenses for its acquisition cannot be attributed to the explicit costs of the present period. However, the owner incurs implicit costs, since he could sell this property and put the proceeds in the bank at interest, or rent it out to a third party and receive income.

Implicit costs, which are part of economic costs, should always be taken into account when making current decisions.

Explicit costs- These are opportunity costs that take the form of cash payments to suppliers of factors of production and intermediate goods.

Explicit costs include:

• workers' wages
• cash costs for the purchase and rental of machines, equipment, buildings, structures
• payment of transportation costs
• communal payments
• payment to suppliers of material resources
• payment for services of banks, insurance companies

Implicit costs- these are the opportunity costs of using resources owned by the company itself, i.e. unpaid expenses.

Implicit costs can be represented as:

• cash payments that a company could receive if it uses its assets more profitably
• for the owner of capital, implicit costs are the profit that he could have received by investing his capital not in this, but in some other business (enterprise)

Returnable and sunk costs

Sunk costs are considered in a broad and narrow sense.

In a broad sense, sunk costs include those expenses that a company cannot return even if it ceases its activities (for example, costs of registering a company and obtaining a license, preparing an advertising sign or company name on the wall of a building, making seals, etc. .). Sunk costs are like a company's payment for entering or leaving the market.

In the narrow sense of the word sunk costs are the costs of those types of resources that have no alternative use. For example, the costs of specialized equipment manufactured to order from the company. Since the equipment has no alternative use, its opportunity cost is zero.

Sunk costs are not included in opportunity costs and do not influence the firm's current decisions.

Fixed costs

In the short run, some resources remain unchanged, while others change to increase or decrease total output.

In accordance with this, short-term economic costs are divided into fixed and variable costs. In the long run, this division becomes meaningless, since all costs can change (that is, they are variable).

Fixed costs- These are costs that do not depend in the short term on how much the firm produces. They represent the costs of its constant factors of production.

Fixed costs include:

• payment of interest on bank loans;
• depreciation deductions;
• payment of interest on bonds;
• salary of management personnel;
• rent;
• insurance payments;

Variable costs

Variable costs- These are costs that depend on the volume of production of the company. They represent the costs of the firm's variable factors of production.

Variable costs include:

• fare
• electricity costs
• raw materials costs

From the graph we see that the wavy line depicting variable costs rises with increasing production volume.

This means that as production increases, variable costs increase:

General (gross) costs

General (gross) costs- these are all the costs for this moment time required for a particular product.

Total costs (total cost) represent the firm's total expenses for paying for all factors of production.

Total costs depend on the volume of output and are determined by:

• quantity;
• market price of the resources used.

The relationship between the volume of output and the volume of total costs can be represented as a cost function:

being inverse function to the production function.

Classification of total costs

Total costs are divided into:

total fixed costs(!!TFC??, total fixed cost) - the company’s total costs for all fixed factors of production.

total variable costs(, total variabl cost) - the company’s total expenses on variable factors of production.

Thus,

At zero output (when the firm is just starting production or has already ceased operations), TVC = 0, and, therefore, total costs coincide with total fixed costs.

Graphically, the relationship between total, fixed and variable costs can be depicted, similar to how it is shown in the figure.

Graphical representation of costs

The U-shape of the short-term ATC, AVC and MC curves is an economic pattern and reflects law of diminishing returns, according to which the additional use of a variable resource with a constant amount of a constant resource leads, starting from a certain point in time, to a reduction in marginal returns, or marginal product.

As has already been proven above, marginal product and marginal cost are in inverse relationship, and, therefore, this law of decreasing marginal product can be interpreted as the law of increasing marginal cost. In other words, this means that starting at some point in time, additional use of a variable resource leads to an increase in marginal and average variable costs, as shown in Fig. 2.3.

Rice. 2.3. Average and marginal costs of production

The marginal cost curve MC always intersects the lines of average (ATC) and average variable costs (AVC) at their minimum points, just as average product curve AP always intersects the marginal product curve MP at its maximum point. Let's prove it.

Average total costs ATC=TC/Q.

Marginal cost MS=dTC/dQ.

Let us take the derivative of average total costs with respect to Q and obtain

Thus:

• if MC > ATC, then (ATS)" > 0, and the average total cost curve of ATC increases;
• if MS< AТС, то (АТС)" <0 , и кривая АТС убывает;
• if MC = ATC, then (ATS)"=0, i.e. the function is at the extremum point, in this case at the minimum point.

In a similar way, you can prove the relationship between average variable costs (AVC) and marginal costs (MC) on the graph.

Costs and price: four models of firm development

Analysis of the profitability of individual enterprises in the short term allows us to distinguish four models of development of an individual company, depending on the ratio of the market price and its average costs:

1. If the firm’s average total costs are equal to the market price, i.e.

ATS=P,

then the firm earns “normal” profits, or zero economic profit.

Graphically this situation is depicted in Fig. 2.4.

Rice. 2.4. Normal profit

2. If favorable market conditions and high demand increase the market price so that

ATC< P

then the company receives positive economic profit, as shown in Figure 2.5.

Rice. 2.5. Positive economic profit

3. If the market price corresponds to the minimum average variable cost of the firm,

then the enterprise is located at the limit of expediency continuation of production. Graphically, a similar situation is shown in Figure 2.6.

Rice. 2.6. A firm at its limit

4. And finally, if market conditions are such that the price does not cover even the minimum level of average variable costs,

AVC>P,

It is advisable for the company to close its production, since in this case the losses will be less than if the production activity continues (more on this in the topic “Perfect competition”).