Fixed variable and total costs. Production costs: fixed and variable Combine fixed and variable costs

CONSTANT COSTS

(fixed cost) The part of gross costs that does not depend on the current volume of production. Fixed costs include management and security costs of the enterprise. Fixed costs in the short run do not affect the output that maximizes profit, but in the long run, a firm that cannot cover its fixed costs will inevitably become insolvent and cease to exist.

Economy. Explanatory dictionary... - M .: "INFRA-M", Publishing house "Ves Mir". J. Black. General edition: Doctor of Economics Osadchaya I.M.. 2000 .

Economic Dictionary. 2000 .

See what "CONSTANT COSTS" are in other dictionaries:

- (fixed costs) See: overhead costs. Business. Explanatory dictionary. M .: INFRA M, Ves Mir Publishing House. Graham Betts, Barry Braindley, S. Williams et al. General editorship: Ph.D. Osadchaya I.M .. 1998 ... Business glossary

Fixed costs- FIXED COSTS Costs, the value of which does not depend on the volume of production in the short term. These are lease payments, depreciation charges, interest on loans and other costs that have to be reimbursed in any case. ... ... Dictionary of Economics

Fixed costs- Costs, the total volume of which is fixed for a given period of time for a given level of production ... Investment Dictionary

Fixed costs- costs, the size of which does not depend on the volume of production ... Economics: glossary

Total fixed costs is an element of the break-even point model, representing costs that do not depend on the volume of output, as opposed to variable costs, which add up to total costs ... Wikipedia

fixed production costs- the costs of the enterprise, which do not directly depend on the volume of products produced, which cannot be increased or decreased in a short period of time in order to increase or decrease production. Usually this… … Dictionary of economic terms

- (average fixed cost) The average fixed cost over a period of time incurred by the cost center. At first glance, it seems that there is a contradiction: if the costs are constant, they do not change and, therefore, do not ... ... Business glossary

notional fixed costs- conditionally fixed costs The dependence of these costs on production volumes has a stepwise nature (for example, the costs of storing materials and finished products). Topics economics Synonyms conventionally ... ...

Production costs costs associated with the production of goods. They are reflected in the accounting and statistical reporting as cost price. Includes: material costs, labor costs, interest on loans. ... ... Wikipedia

fixed costs- non-variable costs An element of costs or expenses that does not depend on the volume of activity in the short term. Also called non-variable or fixed costs. Wed c Variable Cost. ... ... Technical translator's guide

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

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

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

Production costs- these are expenses, money spending that must be carried out to create. For (the firm) they act as payment for the acquired.

Private and social costs

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

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

Public and private costs coincide only in the absence of external effects, or provided that their total effect is equal to zero.

Social Cost = Private Cost + Externalities

Fixed variable and total costs

Fixed costs- this is the kind of cost that the company bears within one. Determined by the enterprise independently. All these costs will be typical for all production cycles of the product.

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

Total costs- those costs incurred by the company during one stage of production.

General = Constants + Variables

Opportunity cost

Accounting and economic costs

Accounting costs- is the cost of resources used by the firm 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 of the possible alternative uses 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 bought in a free competitive market, then the actual equilibrium market price paid for their acquisition is the price of the best alternative (if this were not the case, then the resource would go to another buyer).

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

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 sum of the costs of 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 of internal resources, i.e. resources owned by this firm.

An example of an implicit cost for an entrepreneur would be the salary that he might receive from being employed. For the owner of capital property (machinery, equipment, buildings, etc.), the previously incurred expenses for its acquisition cannot be attributed to the explicit costs of the current period. However, the owner incurs implicit costs, since he could sell this property and put the proceeds in the bank at interest, or lease it to a third party and receive income.

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

Explicit costs Is an opportunity cost that takes 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 of suppliers of material resources
payment for services of banks, insurance companies

Implicit costs Is the opportunity cost of using resources owned by the firm itself, i.e. unpaid costs.

Implicit costs can be represented as:

cash payments that a firm could receive if it made better use of its assets
for the owner of the capital, the implicit cost is the profit that he could receive by investing his capital not in this, but in some other business (enterprise)

Recoverable and sunk costs

Sunk costs are considered broadly and narrowly.

In the broadest sense of the word, sunk costs include those expenses that the company cannot recover even if it ceases to operate (for example, the costs of registration and companies and obtaining a license, preparing an advertising inscription or the name of the company on the wall of a building, making seals, etc. .). The sunk cost is a kind of payment for the firm to enter or leave the market.

In the narrow sense of the word sunk costs Is the cost of those types of resources that have no alternative use. For example, the cost of specialized equipment made by order of 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 affect the current decisions of the firm.

Fixed costs

In the short term, part of the resources remains unchanged, and part changes to increase or decrease the total output.

Accordingly, the economic costs of the short-term period are subdivided into fixed and variable costs... In the long run, this division loses its meaning, since all costs can change (that is, they are variable).

Fixed costs- this is a cost that does not depend in the short run 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 the firm's production. They represent the costs of the variable factors of production of the firm.

Variable costs include:

fare
electricity costs
costs of raw materials and supplies

From the graph, we see that the wavy line depicting variable costs rises up with an increase in production.

This means that with an increase in production, variable costs increase:

Total (gross) costs

Total (gross) costs- this is all the costs at a given point in time required for a particular product.

Total costs (, total cost) represent general expenses firms to pay for all factors of production.

The total costs depend on the volume of products, and are determined by:

quantity;
the market price of the resources used.

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

which is the inverse function of the production function.

Classification of total costs

The total costs are subdivided into:

total fixed costs(!! ТFC ??, total fixed cost) - the total costs of the firm for all fixed factors of production.

aggregate variable costs(, total variabl cost) - the total costs of the firm on variable factors of production.

Thus,

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

Graphically, the ratio of total, fixed and variable costs can be depicted, similarly 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 law 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 the marginal return, or marginal product.

As already proved above, the marginal product and marginal costs are inversely related, and, therefore, this law of decrease of the marginal product can be interpreted as the law of increase marginal cost... In other words, this means that starting from a certain moment in time, additional use of the variable resource leads to increase in marginal and average variable costs, as shown in Fig. 2.3.

Rice. 2.3. Average and marginal production costs

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

Average total cost ATC = TC / Q.

Marginal cost MC = dTC / dQ.

We take the derivative of the average total cost with respect to Q and get

Thus:

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

Similarly, you can prove the ratio of average variables (AVC) and marginal (MC) costs on the graph.

Costs and Price: Four Models of Firm Development

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

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

ATC = P,

then the firm makes a "normal" profit, or zero economic profit.

This situation is graphically 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 firm gets positive economic profit as shown in Figure 2.5.

Rice. 2.5. Positive economic profit

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

the enterprise is located at the limit of expediency continuation of production. A similar situation is graphically shown in Figure 2.6.

Rice. 2.6. The Firm at its Limit

4. And finally, if the 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 with the continuation of production activities (for more details on this in the topic "Perfect competition").

Any company functions for the sake of generating income, and its work is impossible without the funds spent. There are different types of such costs. There are types of activities for which constant investments of finance are required. But some of the costs are not regular, and you must also consider their impact on the course of the product release and its sale.

So, the main point of the work of any company is to release a product and generate income from it. To start this activity, you must first acquire raw materials, tools of production, and hire labor. Certain finances are spent on this, in the economy they are called costs.

People invest finance in production activities for a variety of purposes. Accordingly, a classification of expenses was adopted. Cost categories (depending on properties):

Explicit. Such costs are incurred directly, for the payment of wages to employees, commissions to other organizations, payment for the activities of banks and transport.
Implicit. Expenditures for the needs of company executives that are not specified in contracts.
Permanent. The means by which continuous production processes are ensured.
Variables. Costs that can be easily adjusted while maintaining the same level of product output.
Irrevocable. Expenses of movable assets that are invested in the activities of the company free of charge. Inherent in the initial period of production or re-profiling of the organization. These funds can no longer be spent on other organizations.
Average. The costs obtained in the course of calculations, characterizing the investment in each unit of the product. This indicator contributes to the pricing of the product.
Limit. This is the largest amount of costs that cannot be increased due to the low efficiency of capital investments in the company.
Appeals. The cost of supplying goods from the manufacturer to the consumer.

Application of fixed and variable costs

Consider the differences between fixed costs and variables, their economic characteristics.

First cost element (fixed) is designed for investment in the manufacture of a product in a single production cycle. In each organization, their size is individual, therefore the enterprise considers them separately, taking into account the analysis of the release process. Note that such costs will not differ from the initial production stage to the sale of products to the consumer.

The second type of costs (variables) changes in each production cycle, practically without repetition of this indicator.

The two types of costs together make up the total costs, which are calculated at the end of the production process.

Simply put, fixed costs - those that are constant over a certain period of time... What can be attributed to them?

Payment for utilities;
The cost of operating the premises;
Payment of rent;
Salary to the staff of employees;

It should be borne in mind that the constant level of total costs used in a specific time period of production of products, during one cycle, refers only to the total number of units of goods produced. If you calculate such costs for each unit, their size will decrease in accordance with the increase in output. This fact applies to all types of production.

Variable costs are proportional to the variable quantity or volume of goods produced.... These include:

Energy costs;
Material costs;
Contractual wages.

This type of cost is closely related to the volume of output of a product, as a result of which it changes according to the indicators of production of this product.

Examples of costs:

Each production cycle corresponds to a specific amount of costs that remain unchanged under any conditions. There are also other costs depending on production resources. As previously stated, over a short period of time, costs are variable and constant.

For a long time, such characteristics are not suitable, because costs in this case will vary.

Examples of fixed costs

Fixed costs remain at the same level for any volume of product release, in a short time interval. These are the costs of the company's stable factors, not proportional to the number of units of goods. Examples of such costs are:

payment of interest on a bank loan;
depreciation expenses;
payment of interest on bonds;
salaries for managers at the enterprise;
insurance costs.

All costs, independent of the production of a product, which are unchanged in a short period of the production cycle, can be called constant.

Variable cost examples

Variables, costs, on the contrary, are essentially investments in the production of goods, and therefore depend on its volume. The amount of investment is directly proportional to the amount of goods produced. Examples include spending on:

for stocks of raw materials;
payment of bonuses to employees manufacturing products;
delivery of materials and the product itself;
energetic resources;
equipment;
other expenses for the production of goods or the provision of services.

Consider a graph of variable costs, which is a curve. (Fig 1.)

Fig. 1 - graph of variable costs

The path of this line from the origin to point A represents the increase in costs with an increase in the quantity of goods produced. Section AB: More rapid cost increases in mass production. Variable costs can be influenced by disproportionate costs of transportation services or consumables, misuse of released goods with reduced demand for it.

Example of calculating production costs:

Let's consider the calculation of fixed and variable costs for a specific example. Let's say a shoe company produces 2,000 pairs of boots in a year. During this time, the factory spends funds for the following needs:

rent - 25,000 rubles;
interest on a bank loan - 11,000 rubles;
payment for the production of one pair of shoes - 20 rubles;
raw materials for the production of a pair of boots - 12 rubles.

Our task is to calculate the variables, fixed costs, and money spent on each pair of shoes.

Fixed costs in this case can only be called rent and loan payments. Such costs are unchanged, depending on production volumes, so it is easy to calculate them: 25,000 + 11,000 = 36,000 rubles.

The cost of producing one shoe pair is variable costs: 20 + 12 = 32 rubles.

Therefore, the annual variable costs are calculated as follows: 2,000 * 32 = 64,000 rubles.

Total costs Is the sum of variables and constants: 36,000 + 64,000 = 100,000 rubles.

Average total cost per pair of shoes: 100,000 / 20 = 50

Production cost planning

It is important for each firm to correctly calculate, plan and analyze production costs.

In the process of analyzing costs, options for the economic use of finance are considered, which are invested in production and must be allocated correctly. This leads to a decrease in the cost price, and hence the final price of the manufactured product, as well as an increase in the company's competitiveness and an increase in its income.

The task of each company is to save as much as possible on production and optimize this process so that the company develops and becomes more successful. As a result of these measures, the profitability of the organization also increases, which means there are more opportunities to invest in it.

To plan for production costs, you need to take into account their sizes in previous cycles. In accordance with the volume of goods produced, a decision is made to reduce or increase production costs.

Balance sheet and costs

Among the accounting documents of each company there is a “Profit and Loss Statement”. All information about expenses is recorded there.

A little more detail on this document. This report does not characterize the property status of the enterprise in general, but provides information about its activities for the selected time period. In accordance with OKUD, the profit and loss statement has the form 2. It records income and expense indicators from the beginning to the end of the year on an accrual basis. The report includes a table, in line 020 of which the main costs of the organization are displayed, in line 029 - the difference between profit and costs, in line 040 - expenses included in account 26. The latter represent travel expenses, payment for the protection of premises and labor, remuneration of employees. Line 070 shows the company's interest on loan commitments.

The initial results of calculations (when compiling a report) are divided into direct and indirect costs. If we consider these indicators separately, then direct costs can be considered fixed costs, and indirect - variable.

In the balance sheet, data on costs are not recorded directly, only the assets and financial liabilities of the enterprise are visible in it.

Accounting costs (otherwise called explicit) Is a payment in cash equivalent of any transactions. They are closely related to the economic costs and income of the firm. Subtract the explicit costs from the company's profits, and if we get zero, then the organization has used its resources in the most correct way.

Example of calculating costs

Consider an example of calculating accounting and economic costs and profits. The owner of the recently opened laundry planned to receive an income of 120,000 rubles a year. To do this, he will have to cover the costs:

rental of premises - 30,000 rubles;
salary for administrators - 20,000 rubles;
purchase of equipment - 60,000 rubles;
other minor costs - 15,000 rubles;

Credit payments - 30%, deposit - 25%.

The head of the enterprise bought the equipment at his own expense. Washing machines are subject to breakdown after a while. Taking this into account, it is necessary to create a depreciation fund, into which 6000 rubles will be transferred every year. All of the above are obvious costs. Economic costs - the possible profit of the owner of the laundry, in the case of purchasing a deposit. To pay the initial expenses, he will have to use a bank loan. A loan in the amount of 45,000 rubles. will cost him 13,500 rubles.

Thus, we calculate the explicit costs: 30 + 2 * 20 + 6 + 15 + 13.5 = 104.5 thousand rubles. Implicit (deposit interest): 60 * 0.25 = 15 thousand rubles.

Accounting income: 120-104.5 = 15.5 thousand rubles.

Economic income: 15.5-15 = 0.5 thousand rubles.

Accounting and economic costs differ from each other, but they, as a rule, are considered together.

The value of production costs

Production costs form the law of economic demand: with an increase in the price of a product, the level of its market supply increases, and with a decrease, supply also decreases, while other conditions remain unchanged. The essence of the law is that each manufacturer wants to offer the maximum amount of goods at the highest price, which is the most profitable.

For the buyer, the cost of the product is a deterrent. The high price of the product forces the consumer to buy less of it; and, accordingly, cheaper products are purchased in large volumes. The manufacturer receives a profit for the released product, so he seeks to produce it with the aim of acquiring revenue from each unit of goods, in the form of its price.

What is the main role of production costs? Let's consider it on the example of a manufacturing industrial enterprise. Over a certain period of time, production costs increase. To compensate them, you need to raise the price of the product. The increase in costs is due to the fact that it is impossible to quickly expand the production area. The equipment is overloaded, which reduces the efficiency of the enterprise. Thus, in order to produce the product with the highest cost, the firm must set a higher price for it. Price and supply levels are directly related.

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

Variable cost concept

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, yeast can be cited as an example of variable costs for such an enterprise. These costs will grow in proportion to the growth in the volume of bakery products produced.

One cost item can relate to both variable and fixed costs. Thus, the cost of electricity for production ovens that bake bread will serve as an example of variable costs. And the electricity bill for lighting a production building is a fixed cost.

There is also such a thing as conditional variable costs. They are related to production volumes, but to a certain extent. With a small level of production, some costs still do not decrease. If the production furnace is half-charged, the electricity consumption is the same as for the full furnace. That is, in this case, with a decrease in production, costs do not decrease. But with an increase in output volumes above a certain value, costs will increase.

The main types of variable costs

Here are some examples of variable costs of an enterprise:

The wages of employees, which depends on the volume of products they produce. For example, in a bakery industry, a baker, a packer, if they have piecework wages. It also includes bonuses and rewards to sales specialists for specific volumes of products sold.
The cost of raw materials, 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, which is spent on the production process. It can be natural gas, gasoline. It all depends on the specifics of a particular production.
Another typical example of variable costs is taxes paid on the basis of production volumes. These are excise taxes, taxes with tax), the simplified tax system (simplified taxation system).
Another example of variable costs is paying for the services of other companies if the volume of use of these services is related to the level of production of the organization. These can be transport companies, intermediary firms.

Variable costs are divided into direct and indirect

This separation exists due to the fact that different variable costs are included in the cost of a product in different ways.

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

Indirect costs are allocated to the entire volume of goods produced in accordance with a defined base.

Average variable costs

This indicator is calculated by dividing all variable costs by the volume of production. Average variable costs can both decrease and increase as production volumes increase.

Consider an example of average variable costs in a bakery. Variable costs for the month amounted to 4,600 rubles, the output was 212 tons. Thus, the average variable costs will amount to 21.70 rubles / ton.

The concept and structure of fixed costs

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

Fixed production costs usually include the following:

rent for premises, shops, warehouses;
utility bills;
administration salary;
the cost of fuel and energy resources that are consumed not by production equipment, but by lighting, heating, transport, etc .;
advertising costs;
payment of interest on bank loans;
purchase of office supplies, 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 cost of the organization. As production volumes increase, gross costs increase in terms of variable costs.

All costs, in fact, represent payments for the acquired 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 the main activity: divide the profit by the amount of costs. Profitability shows the effectiveness of the organization. The higher the profitability, the better the organization performs. If profitability is below zero, then expenses exceed revenues, that is, the organization's activities are ineffective.

Enterprise Cost Management

It is important to understand the nature of variable and fixed costs. With proper cost management in the enterprise, their level can be reduced and more profit can be obtained. It is practically impossible to reduce fixed costs, therefore, effective work to reduce costs can be carried out in terms of variable costs.

How you can reduce costs in the enterprise

In each organization, work is structured differently, but basically there are the following ways to reduce costs:

1. Reducing labor costs. It is necessary to consider the issue of optimizing the number of employees, tightening production standards. Some employee can be reduced, and his responsibilities can be distributed among the rest with additional payment for additional work. If the enterprise grows production volumes and it becomes necessary to hire additional people, then you can go by revising production standards and or increasing the volume of work in relation to old workers.

2. Raw materials and supplies are an important part of variable costs. Examples of their reduction can 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 analogs;
implementation of joint purchases of raw materials with other buyers from one supplier;
self-production of some of the components used in production.

3. Reducing production costs.

This can be a selection of other options for rent payments, sublease of premises.

This also includes saving on utility bills, for which it is necessary to use electricity, water, and heat carefully.

Savings on the repair 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 more economical to narrow production, transfer some side functions to another manufacturer. Or, on the contrary, to enlarge production and carry out some functions independently, refusing to cooperate with subcontractors.

Other areas of cost reduction can be the organization's transportation, advertising, tax reduction, and debt settlement.

Any business must consider its costs. Working to reduce them will bring more profit and increase the efficiency of the organization.

Fixed and variable costs are costs that a company incurs to produce goods, works or services. Their planning allows more efficient use of available resources, as well as forecasting activities for the future.

Download and take to work:

Fixed costs remain unchanged if the organization decreases production. In this case, the share of fixed costs will increase for one unit of manufactured products. And vice versa - with an increase in production volumes, the share of fixed costs per unit of output will decrease. This metric is Average Fixed Cost (AFC).

Graphically, fixed costs can be represented as a straight line, since they remain unchanged for any changes in production (Fig. 1). Cm. .

Picture 1. Direct cost schedule

Variable costs

Variable costs depend on the increase or decrease in production volumes. If an organization increases the number of products it produces, the costs of materials and resources required for this increase correspondingly.

Examples of variable costs:

Wages of workers with a piece-rate system of remuneration.
The cost of raw materials and supplies.
Transportation costs for the delivery of products to the consumer.
Electricity costs, etc.

More on the topic:

How will help: find out what costs are worth cutting. It will tell you how to audit business processes and inventory costs, how to motivate employees to save.

How will help: prepare in Excel a report on the expenses of a group of companies in the required detail - by business units, directions, articles and periods

Variable costs vary with changes in production volumes. With an increase in the number of products produced, variable costs will increase and, conversely, with a decrease in the amount of products produced, they will decrease. Cm. .

The graph of variable costs is as follows - fig. 2.

Picture 2. Variable cost graph

At the initial stage, the increase in variable costs is directly related to the number of products produced. Gradually, the increase in variable costs slows down, which is associated with cost savings in mass production.

Total costs

The sum of all costs, fixed and variable, that an organization spends on the production of goods or the provision of services, is called total costs (TC - total costs). They depend on the amount of production volumes and the cost of resources spent on production. Graphically, the total costs (TC) are as follows - Fig. 3.

Figure 3.Fixed, variable and total costs graph

An example of calculating fixed and variable costs

The company OJSC "Sewing Master" is engaged in sewing and selling clothing wholesale and retail. At the beginning of the year, the organization won a tender and signed a long-term contract for a period of 1 year - a large order for sewing overalls for medical workers in the amount of 5,000 units per year. The organization incurred the following costs during the year (see table).

table. Company costs

Cost type	Amount, rub.
Sewing workshop rent	RUB 50,000 per month
Depreciation deductions according to accounting data	RUB 48,000 in a year
Interest on a loan for the purchase of sewing equipment and necessary materials (fabrics, threads, sewing accessories, etc.)	RUB 84,000 in a year
Utility bills for electricity, water supply	RUB 18,500 per month
The cost of materials for sewing workwear (fabrics, threads, buttons and other accessories)
Remuneration for workers (workshop personnel was 12 people) with an average wage of 30,000 rubles.	RUB 360,000 per month
Remuneration for the labor of administrative personnel (3 people) with an average salary of 45,000 rubles.	RUB 135,000 per month
Sewing equipment cost

Fixed costs include:

rent for a sewing workshop;
depreciation deductions;
payment of interest on a loan for the purchase of equipment;
the cost of the sewing equipment itself;
the remuneration of the administration.

Calculation of fixed costs:

FC = 50,000 * 12 + 48,000 + 84,000 + 500,000 = 1,232,000 rubles per year.

Let's calculate the average fixed costs:

Variable costs include the cost of raw materials and materials, wages for workers in the sewing workshop and payment of utility costs

VC = 200,000 + 360,000 + 18,500 * 12 = 782,000 rubles.

Average variable costs will be:

The sum of the fixed and variable costs will give the total costs:

TC = 1232000 + 782000 = 20 140 00 rubles.

We calculate the average total costs using the formula:

Outcomes

The organization has just started sewing production: it rents a workshop, acquired sewing equipment on credit. The amount of fixed costs at the initial stage is significant. The fact that the volume of production is still low - 5,000 units also plays a role. Therefore, fixed costs still prevail over variables.

With an increase in production volumes, fixed costs will remain unchanged, but variable costs will increase.

Analysis and planning

Cost planning allows an organization to rationally and more efficiently use available resources, as well as forecast its activities for the future (applies to the short term). Analysis is also necessary in order to determine where the most costly items of expenditure are and how you can save on the production of goods.

Saving on fixed and variable costs reduces the cost of production - an organization can set a lower price for its products than before, which increases the competitiveness of products in the market and increases attractiveness in the eyes of consumers (