"A woman was created for a man, not a man for a woman" - such a postulate ...
The essence and content of planning production costs
TOPIC 12. PLANNING OF PRODUCTION COSTS
Any production activity in conditions market economy it is advisable only if the value of the goods produced exceeds the value of the initial resources (or factors) spent on their production and sale. The main goal of the enterprise is to maximize this difference.
From an economic point of view, costs (costs) represent the cost of all types of materials (resources) and services performed.
Distinguish between economic and accounting costs.
Accounting costs include only explicit costs presented in the form of payments for acquired resources.
Economic costs take into account the use of all resources, including non-profitable ones (like the labor of the owner of the enterprise, the participation of capital, land, etc.). The degree of difference between economic and accounting costs depends on the amount and types of resources provided to the enterprise by their owners.
Also, costs are divided into fixed and variable, general and average, gross and specific, short-term and long-term, etc.
Under fixed costs means such costs, the value of which does not change depending on the volume of products. These include the cost of maintaining technological equipment, industrial buildings, rent, depreciation, etc.
Variables such costs are considered, the value of which varies depending on the volume of products produced. They include the cost of raw materials, materials, fuel, energy, wages of production workers, etc.
Common (or gross) costs called the sum of fixed and variable costs for each given volume of production. With zero production, total and fixed costs are equal. Then, with an increase in production, gross costs change by the amount of variable costs.
Average costs And avg determine the value of production costs per unit of production:
Yper - amount variable costs;
In n- the volume of production.
Average costs are used in planning to compare with market prices and serve as a measure to justify the optimal output of various types of products.
In planning production costs are also widely used marginal cost , determining additional, or additional, costs associated with the production of one more unit of production. Marginal costs And pr can be found for each additional unit of production as the ratio of the increase in gross costs to the corresponding increase in the number of goods produced:
WHERE P VI - increase in gross costs;
П ВП - increase in production output.
An important economic planning indicator that summarizes the costs of an enterprise for the production and sale of products, the performance of work or services is production cost , which is the total cost estimate of resources (natural, industrial, labor, financial, etc.) used in the process of manufacturing and marketing of goods.
IN general view the planned cost of production C p can be expressed as the sum of the following costs, grouped by their economic content:
C n = Z MAT + Z O + O C + A O + Z PR
Where: З MAT - material costs;
3 0 - labor costs;
Oh with- deductions for social needs;
A p - depreciation of fixed assets;
Zpr - other costs.
In planning practice, all costs are grouped according to two main characteristics: economic elements and cost items. The grouping of costs by economic elements provides for them unification on the basis of homogeneity, regardless of where and for what they were produced. This grouping is used when planning production cost estimates. However, in economic elements, it is impossible to plan the unit cost. For this purpose, it is necessary to group costs by production purpose and place of origin, i.e. by calculation items.
When planning the cost of production (i.e. by costing items.) it is customary to classify cost items according to the following criteria:
by the method of attribution to the unit cost - direct and indirect;
by the nature of the dependence on the volume of production, variable and constant;
by composition (degree of homogeneity) - simple (elemental) and complex;
according to the degree of participation in the production process. - basic (technological) and invoices.
Direct costs represent separate costing items and are charged to the cost of production based on primary documents. Indirect costs which include general production costs, are accounted for first at the place of origin, and at the end of the month are distributed by type of product, reflected in the cost price as separate items. They are included in the cost of specific types of products in proportion to some distribution base, for example, the wages of basic production workers or other direct costs.
IN modern production standard cost estimate contains the following typical cost items:
1. Raw materials and materials.
2. Returnable waste (deducted).
3. Purchased components, semi-finished products and services of cooperative enterprises.
4. Fuel and energy for technological purposes.
5. Total material costs.
6. Main wage production workers.
7. Additional wages of production workers.
8. Social security contributions.
9. Expenses for preparation and development of production of new products.
10. Manufacturing of tools and devices for special purposes.
11. Expenses for the maintenance and operation of equipment.
12. Workshop costs.
13. Losses from marriage.
14. Other production costs.
15. Shop cost.
16. General business expenses.
17. Production cost.
18. Non-production costs.
19. Commercial cost.
The enterprise cost plan consists of the following sections:
1) calculation of reducing the cost of production due to the influence of technical and economic factors on it;
2) calculating the cost of types of products (works and services);
3) estimate of production costs.
The initial data for developing a cost plan are:
the amount of profit established by the tactical plan, as well as the level of profitability of production or tasks to reduce the cost of production;
indicators of production and sales of products; the effectiveness of measures for the section of the tactical plan of innovations;
Progressive norms and standards of the corresponding section of the tactical plan;
indicators of the plan for the material and technical support of production;
Price lists;
Data on the use of fixed assets and the amount of depreciation charges;
Indicators of the plan for labor and personnel;
Scope of work on preparation of production, development and implementation new technology, the volume of production of new technology.
When planning the cost of production, the following methods are used.
1. Factorial method. Its essence lies in determining the influence of technical and economic factors on production costs in the planned year compared to the previous year. When planning the cost, this method is applied in order to:
Ensuring the comparability of the plan indicators with similar indicators of other periods;
Implementation of an enlarged calculation of the main technical and economic indicators of production and economic activity at the stage of preparation and comparison of options for proposals in terms of production volumes;
The most complete accounting of the effectiveness of the implementation of measures for the plan to improve production efficiency;
Determination of the participation of individual services, departments and production units in reducing costs and increasing production efficiency, material incentives for this participation, reducibility of indicators for the enterprise, association, industry and the region as a whole;
Analysis and comparison of production costs at various enterprises and associations.
2. Estimated method. It involves the justification of each cost item using a special cost estimate. The estimate can be drawn up both for individual complex items of expenditure, and as a whole for the volume of gross, marketable and sold products. When planning the cost, separate sections of the plan can be used as separate estimates, for example, a logistics plan, a labor and personnel plan, a technical and organizational development pre-
assumptions in which the costs of the corresponding resources are justified.
The cost estimate method allows you to link separate sections of the tactical plan with each other and coordinate them with the plans of internal production units. On the basis of cost estimates, a set of costs for the production of products as a whole for the enterprise is compiled. IN this case the set of costs for the enterprise is the amount of costs calculated in the estimates of structural divisions. This method is quite laborious and is used at the stages of the final drawing up of the plan. In foreign planning practice, this method is called budgeting, and the cost estimate is called a budget.
3. Calculation method... FROM using this method, the value of the cost of producing a unit of products, works, services or their structural elements, for example, a part, a unit, is justified. When planning the cost price using this method, it is important to correctly determine the costing objects. They can be: separate products; orders; technological redistribution; brands, varieties, articles, etc. In the future, calculations are used when planning the cost of gross, marketable and sold products, cost estimates and a set of costs for the enterprise.
4. Normative method. Here, the level of costs for the production and sale of products, works, services is calculated on the basis of previously drawn up norms and standards. This method is widely used in the preparation of planned cost estimates and cost estimates. The most important advantage of the normative method of planning the cost of production is the ability to separately account for deviations from the current (current) standards and their causes.
This allows you to judge what factors led to the change
costs, and timely make optimal decisions aimed at improving the economic performance enterprises.
When planning the cost of production, these methods are used, as a rule, simultaneously, in a complex, which makes it possible to solve a number of interrelated problems of planning costs.
Theme plan:
- 1. The essence of accounting and economic costs and profits of the firm.
- 2. The structure of the company's costs in the short run (fixed, variable and gross, average and marginal).
Costs
Production costs(transformational) - the cost of rare resources for the production of goods
IP reflect the process of transformation (transformation) of resources into goods and materials or services
Transaction costs- the costs of market interaction between entities when concluding market transactions or exercising property rights (searching for partners in a transaction, concluding a contract, protection from bad faith, protection of property rights, etc.)
TI reflect the incompleteness of information and the imperfection of the rationality of the subject
Production costs represent the cost of producing a product or service, that is, it is the sum of the costs of acquiring resources (factors) required for a given production
Economic costs
External (explicit or accounting) costs represent the monetary costs of paying for resources (raw materials, fuel, electricity, transportation services, labor resources, etc.) not owned by the firm and purchased from external suppliers.
Material costs
The salary
Social Security contributions
Depreciation (reflection of fixed asset wear)
Others (commission,%, taxes, rent ...)
Internal (implicit) costs are directly unpaid costs associated with the use of the firm's own resources. including such an important resource as your entrepreneurial talent.
So, the owner of the company can use his own production facility,
own (and not borrowed) money capital and other resources,
including such an important resource as your entrepreneurial talent.
The implicit costs are usually equal to those monetary payments ( income) that could be obtained with the best alternative way of using them (as if he were giving them out for external use):
rent from rented premises,
percentage of capital deposited in a bank, etc.,
as well as normal profit as a reward for performing entrepreneurial functions.
Normal profit ...
... represents the minimum fee required to keep an entrepreneur in the business.
Average, typical in a given economy, the value of return on invested capital
NP tends to equalize by sectors of the economy
If accounting profit> or = normal, then the firm remains in the industry
Opportunity cost is ...
the value of other goods that could be produced using a given combination of resources ...
... In the case of the most rational disposal of them
Aggregate (economic) costs
The combination of external (explicit) and internal (implicit) costs is called economic (or alternative) costs.
This is what distinguishes the economic approach from the accounting
In this sense, the entire set of costs can be considered alternative (economic), which corresponds to the best way to use the resources involved from the possible options
The ratio of accounting and economic costs
Distinguish between accounting and economic profit:
Profit = Revenue - costs = TR - TC
Accounting profit is the difference between the total revenue (TR) received from the sale of products and the sum of the prices of goods sold, and accounting costs.
Accounting P = Revenue - BI
Economic profit is equal to the difference between revenue and economic costs (moreover, the latter, as we know, include the entrepreneur's normal profit).
Ultimately, accounting profit differs from economic profit by the amount of internal (implicit) costs.
Economic P = Revenue - EI Economic P = Revenue - (BI + Internal I) = (Revenue - BI) - Internal I = BP - Internal I
Economic profit options
1) With a positive accounting profit, the economic may be
2) If accounting profit> 0, but equal to internal costs, then eq. profit = 0 (the most typical variant for Soviet competition
3) The best option is when BP> 0 and> internal costs, this means that the firm receives a positive economic profit, operates efficiently
Economic profit, unlike normal profit, is not included in the economic costs of the firm.
Receiving it is a special case.
It can be given to individual firms as a reward for achieving lower costs compared to the average for a given industry and can be related to:
- taking on a special risk
- or with the possession of monopoly power.
The ratio of costs, accounting and economic profit
2. The structure of the costs of the company in the short run
Company resources
Permanent resources are characterized by a low degree of mobility
Variable resources mobilize relatively quickly
The short-term period does not allow to build up absolutely all resources
The long term allows you to mobilize any resources
The long-term period of time is sufficient to change the amount of use of any resource, including the size of production facilities, as well as the number of firms involved in the industry.
Therefore, in the long run, all resources used, and therefore all costs, are variable.
In the short term, the firm does not have enough time to change the size of production capacity.
Therefore, in the short run, the costs of the firm are divided for constants and variables:
the use of some resources (production capacity) can be considered fixed, constant,
and the use of other factors (labor, raw materials, etc.) can be changed in order to increase or decrease the volume of production, i.e. they are variables
Fixed costs (FC)
- these are the costs that do not depend on the volume of production (even during downtime, these costs take place):
- part of the deductions for the depreciation of buildings and equipment,
- rent,
- insurance premiums,
- the salary of the administrative and managerial staff and the retained "backbone" of the working personnel,
- obligations for bonded loans, some types of taxes, etc.
Fixed costs in the short term
Variable costs (VC) are those costs that depend on the volume of goods produced and change with a change in its output
costs of raw materials and supplies,
fuel and energy,
transport services,
for the wages of production workers, etc.
Variable Cost (VC)
In the first segment, the rate of increase in the volume of production will outstrip the rate of increase in variable costs (the VC curve is convex)
At the second stage, the rates of their increase can become equal (the VC curve) is almost horizontal (the enterprise is close to the technological optimum)
In the third section, the rate of increase in variable costs will outpace the rate of growth in the volume of production (the VC curve is concave), which indicates an ineffective combination of constant and variable resources and the action of the law of diminishing productivity
The law of diminishing returns (productivity)
Adding additional units of one resource with the rest unchanged leads to a situation where subsequent units of a variable resource bring all ...
The law of diminishing returns
The sum of all costs - fixed and variable - is the total (or gross) cost (TC).
Average costs - costs per unit of product (the corresponding type of costs TC, FC, VC per unit of production)
ATC = TC / Q
AFC = FC / Q
FVC = VC / Q
Average fixed costs
The graph of average fixed costs (Fig. 3) has the form of a constantly decreasing curve (hyperbole), since the same amount of fixed costs is divided by an ever increasing amount of production (in practice, this is called "distribution of overhead costs").
Average fixed costs (AFC)
Average variable costs
The graph of average variable costs has a more complex, U-shaped (parabola) shape, i.e. at first, the average variable costs fall per unit of output, reach their minimum at so on, and then begin to increase. This is due to the law of diminishing returns.
Average variable costs (AVC) and average total costs (ATC)
The ATC average gross cost graph (Figure 3) can be plotted by vertically adding AFC and AVC. Therefore, it will be located higher and, like the AVC graph, will have a U-shaped parabola with a minimum at T.O.
That is, the ATC schedule also obeys the law of diminishing returns, but taking into account a certain influence from the constantly decreasing average fixed costs
The law of diminishing returns In accordance with the law of diminishing returns, if of all the factors used, at least one is constant and cannot be changed within a short-term period (for example, production equipment or land), then the sequential increase in the use of a variable resource (for example, labor) will go through several stages
Average total costs (ATC)
At first, an increase in the use of a variable resource will give an increase in returns (profitability) in the form of a greater growth in the volume of production compared with an increase in labor units due to the improving efficiency of using previously underutilized equipment. This will be a stage of increasing returns (profitability, productivity). Average variable and average total costs at this stage will decrease until they reach their minimum at t.O.
After reaching the optimal ratio (technological optimum) between the fixed and variable factors, including workers). Production efficiency will begin to decline. This will be the stage of diminishing returns (profitability, productivity) and, therefore, the average variables and average total costs will begin to increase.
MC's marginal cost
These are additional costs associated with the production of one more additional unit of production, that is, this is an increase (change) in gross costs with an increase in production by one additional unit of production
MS = TC n - TC (n-1) or MC = VC n - VC (n-1)
If the increase in production occurs immediately not by one, but by several units of production, then the marginal costs are calculated as the quotient of dividing the increase in gross costs by the increase in the number of products produced: ТС n - TC (n-1) / Q n - Q (n-1 ).
Firm's marginal cost (MC)
U-shape MC
The graph of the marginal costs of the MS (Fig. 5), as well as the associated ATS and AVC graphs, obeys the law of diminishing returns and has a U-shaped parabola: first, the marginal costs of producing each new additional unit of production fall, reach their minimum in t. M, and then they begin to increase.
Intersection of MC with VC and TC minimums
As long as the marginal costs of the MC remain less than the ATC and AVC, the latter will continue to fall. As soon as MCs become more PBX and AVC, the latter will start to grow.
Therefore, at the turning points, namely at the minimum points of ATC and AVC, the marginal costs are compared with the corresponding values of the average costs, that is, the MC graph will intersect the ATC and AVC charts at their minimum points.
Graphic interpretation
Technological optimum - production at minimum costs of the vehicle (with constant production capacities)
3. Costs of the company in the long run.
In the long run
All costs of the firm are variable, and it can increase the scale of production, vary various combinations of all possible resources, searching for the optimal size of the enterprise, changing production capacity) in order to reduce average costs and maximize income
Then, long-run average costs (LATC) are a function of average total costs (without dividing into fixed and variable) depending on the different sizes of the enterprise
Various options for changing the size of the enterprise and corresponding to each of them graphs of short-term average costs (ATC1, ATC2, etc.) can be considered.
Then the LATC curve can be plotted as wavy line consisting of successive sections of short-term average cost curves connected at their intersection points
If there are infinitely many options for expanding production, then the LATC curve is plotted as a smoother line enveloping all curves of short-term average costs through the points of contact with each of them (ATC1, ..., ATC n).
Typical for the LATC curve is arcuate shape with the achievement of the site of minimum costs corresponding to the optimal size of the enterprise
Firm's costs in the long term
Positive economies of scale
At the first stage of the expansion of the enterprise, there is a positive effect of scale of production (or the effect of mass production, economies of scale of production): with the expansion of the scale of production, total costs grow more slowly than the total volume of production increases, that is, long-term average costs per unit of production fall
Economies of scale
Deeper and more efficient specialization of resources: labor, equipment, management personnel in a large-scale production environment.
Wider technological capabilities for the effective use of expensive high-performance equipment, technological lines in comparison with a small business.
Greater opportunities for the production of by-products from waste.
Further savings on overhead costs (for administrative and management personnel, for various types of infrastructure, etc.).
2nd stage of constant return, when long-term average costs stabilize
3rd stage - from a certain moment, total costs begin to grow faster than the number of products produced, therefore, LATC increases. In this case, it manifests itself de-economy on a production scale (or negative economies of scale), when the advantages of large-scale production turn into its disadvantages: difficulties in managing a huge economic organism, bureaucratization of the administrative apparatus, the effectiveness of managerial decisions decreases, etc.
Structural differences in industries
In different sectors of the economy, the shape of the LATC curve and the optimal size of enterprises differ due to the action of many industry characteristics.
The shape of the long-run average cost curve can be decisive for the structure and level of competitiveness of an industry.
1) The first group of industries in which the positive effect on the scale of production dries up rather quickly, then there is a rather long stage of constant return of О1О2, and only after reaching a rather significant volume of production does the stage of de-economy on the scale of production begin.
This graph indicates that both small and large firms are equally effective in these industries (for example, in furniture production, woodworking, etc.).
The second LATC graph shows a rapidly disappearing scale effect, which immediately changes to a negative effect.
The third LATC graph (Figure 10) shows an example of industries where economies of scale build up for a long time, optimal enterprise size is significant, and negative economies of scale are quite distant.
The structure of such industries will be dominated by a small number of very large enterprises, and the extreme case may be the dominance of one enterprise - monopolies
Depreciation and amortization
Features of capital resources (machinery, equipment, buildings, etc.)
They last for a long time (and not one production cycle like raw materials and materials)
Are subject to wear = gradual loss of value by capital goods
In accordance with this, gradually, as they wear out (in parts), they transfer their value to the cost of a new product.
Two types of wear: physical and moral
Physical wear and tear is manifested in the loss of their consumer qualities (technical and production properties) by means of labor
There are, in turn, two types of physical wear:
- 1 - depreciation as a result of the direct exploitation of capital goods in the production of goods (variable costs)
- 2 - destruction, aging of inactive equipment simply from time, under the influence of the forces of nature and poor use (post-ed.)
Obsolescence of (even physically new) equipment
It is associated with a decrease in the market price of obsolete (morally) capital goods, which is not associated with the loss of their original functional properties (as with physical wear and tear)
Also has two types of obsolescence
Two kinds of obsolescence
1 - associated with the appearance of similar, but cheaper capital goods (equipment), therefore, your previously purchased equipment will become cheaper (you bear losses)
2 - associated with the emergence of new, more productive capital goods of this type, so the value of your previously purchased equipment will decrease
Depreciation
1) the degree of depreciation of capital goods
2) the transferred part of the value of the capital good accumulated in the depreciation fund, intended to compensate for its depreciation (for complete replacement or repair)
The depreciation rate is the percentage of the cost of capital goods, by which they are considered to be worn out for the year (% of the cost of equipment, which is transferred to the cost of the products produced by the company for the year): Nam = 1 / n * 100%; determined by the market ???
Am = Origin. equipment item * Nam
Accumulation of funds in the depreciation fund
After 10 years, an amount of $ 20,000 will be accumulated in the depreciation fund to buy a new car to replace the old one.
Depreciation policy of the state
It is connected with the interest of the state in updating and improving the capital base of the country, in accelerating technical progress
Connected with the need for a rational distribution of funds between the depreciation fund and profit, and therefore the taxable base
A special type is a policy of accelerated depreciation to stimulate investment and accelerate scientific and technological progress
Plan:
2. Types of costs.
3. Break-even point.
4. Cost management of the enterprise.
1. Classification of production costs.
The profit of the enterprise depends on 2 indicators: product prices and production costs.
Price- there is a consequence of the interaction of supply and demand.
Costs can rise or fall in depending on the amount of consumed resources, the level of technology, the organization of production and other factors.
In general production and sales costs(the cost of products, works, services) is a cost estimate of natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources, as well as other costs for its production and sale used in the production process.
(by signs):
Cost classification methods(by signs):
1. Per unit of production(by the method of attributing costs to the cost price in Russia): direct and indirect.
Direct costs are directly related to the production of a certain type of product (work, services) and can be taken into account in the cost of this type of product (work, services) (raw materials, materials, semi-finished products, components, workers' salaries, etc.).
Indirect costs are associated with the release of several types of products (works, services) and are distributed between them in proportion to some attribute (selected base), which should be reflected in the accounting policy (energy, fuel, general business costs, general production costs, non-production costs).
2.Depending on the volume of production: Conditional variables; conditionally permanent and mixed.
3.By economic elements: material, personnel, the rest (other).
4.According to the place of origin: procurement, warehouse, production, management, sales.
5.By the degree of production capacity(scale efficiency): regressive variables, proportional variables, progressive variables.
2. Types of costs.
1) Material costs (minus the cost of returnable waste).
This is the cost of goods purchased from outside for the production raw materials and materials, component parts and semi-finished products, fuel and energy of all types spent both for technological purposes and for the maintenance of production (heating of buildings, transport work, etc.)).
2) Labor costs (+ deductions for social needs).
This includes the wages of workers and administration.
Two fundamentally different forms of remuneration are used: time-based and piece-rate.
Cost is excluded from the cost of material resources returnable waste, which are understood as the remnants of raw materials, materials, heat carriers formed during the production process, which have completely or partially lost the consumer qualities of the original product and, therefore, are used at increased costs or are not used at all for their intended purpose.
Time Pay
Time Pay labor is used where the amount of products produced by the worker does not depend on his individual efforts, for example, on conveyor lines, as well as where the quality of the products plays the main role and where it is difficult or impossible to calculate the amount of work performed.
Both forms can be varied.
For example, piecework - bonus, those. piece-rate payment with a guaranteed minimum. This blended wage provides the worker with a minimum wage while taking advantage of piecework wages.
Official salaries serve as a form of remuneration for the administration. In addition to fixed salaries, bonuses are paid as incentives.
3) Social contributions.
Reflect compulsory contributions according to the established norms to the state social insurance bodies.
4) Depreciation of fixed assets.
The structure of depreciation includes the amount of depreciation charges for the complete restoration of fixed assets, calculated on the basis of their book value and established norms, including accelerated depreciation of their active part.
Depreciation is a part of fixed costs, which is formed by distributing the one-time costs for the acquisition of fixed capital over several periods of its use.
In this case, several depreciation calculation methods: linear depreciation, depreciation by residual value, depreciation by volume of production.
Linear depreciation:
5) Payment for the rental of premises.
5) Payment for the rental of premises. This is often a relatively large cost item. If the company rents premises, then the amount of costs under this item is equal to the total amount of the rent.
If the premises belong to the enterprise itself, then the payment for its "rent" consists of a number of items: mortgage payments, real estate tax, insurance, operating costs, and lost opportunities are also taken into account- percent of equity capital invested in this property.
6) Other costs, those. all other costs not included in the cost elements listed above:
- taxes, fees;
- loan payment;
- payment for communication services;
- energy carriers, etc.
costs
Fixed costs (FC) - independent of the volume of production, in a given period:
- salaries of employees;
- amortization of fixed capital;
- rental of premises;
- other relatively fixed costs.
Fixed costs are divided into residual and start-up costs.
TO residual includes that part of fixed costs that the enterprise continues to bear despite the fact that production and sales of products are completely stopped for some time.
TO starting, includes that part of fixed costs that arises with the resumption of production and sales of products.
There is no clear distinction between residual and start-up costs.
The longer the period of stoppage of economic activity, the lower the value of the residual costs, because at the same time, the opportunity to get rid of certain types of expenses increases or to reduce them (for example, a lease of premises, contracts for the employment of certain categories of workers) .
In foreign practice, the method of calculating the costs of manufacturing products is used for a limited, reduced nomenclature of costing items. Only variables are included in costs costs These costs are considered as a function of the magnitude of the volume of production, therefore, the division of production costs into fixed, variable, gross, marginal is accepted.
Variable costs -(VC).
Variable costs - the value of which changes depending on the change in the volume of production (VC).
(salary, costs for raw materials, materials, electricity, etc.).
The sum of constants and variables - gross costs (TC).
TC = FC + VC
Average costs:
AFC - average fixed costs per unit of output.
AFC = FC / Q
AVC - average variable costs per unit of output.
AVC = VC / Q
ATC - average gross costs per unit of production. ATC = TC / Q or ATC = AFC + AVC
Marginal cost - production costs for one additional unit. (MS)
Fixed, variable and gross costs.
3. Break-even point.
It is a profit planning method based on the fact that both income and costs are a function of the volume of production, therefore, profit is a function of the volume of production.
Only variable costs are planned and accounted for in the cost price. Fixed costs are debited from the income accounts of the reporting year - marginal income (reduces the margin)
Margin income is the difference between sales revenue and variable costs and is intended to recover fixed costs and generate profit.
Algebraically, the method for calculating the break-even point:
TR = TC, hence Profit = 0
This accounting method is called direct cost... This method is widely used in the management of managers, as it allows you to take the most effective solution from alternative ones based on the analysis of the relationship between cost price, sales volume and profit. The presence of such a dependence is used by the manager to determine the break-even sales volume and the profitability threshold. The critical volume point shows that total amount variable cost margin recovers the total fixed cost for a given period.
3. Cost management.
Cost management is based on three principles:
- validity (expediency);
- targeted use of resources;
- efficient use of resources.
The feasibility of costs is ensured at the planning stage, confirmed by financial calculations. The feasibility of investment costs is determined by the terms of their payback. It is necessary to calculate several options for making an investment. The selection criterion is the minimum payback period.
The targeted use and effective use of the allocated resources is ensured in the process of direct implementation of specific tasks.
The results of current control allow making operational decisions aimed at adjusting the controlled process.
The main ways to reduce costs:
1) Reduced costs for wages.
In developed countries, wages are 20 - 25% in the cost structure, which means that the task of reducing labor intensity, increasing labor productivity, and reducing administrative and managerial personnel arises.
Ways to achieve:
- mechanization and automation;
- new technologies;
- replacement and modernization of equipment;
- work organization (preparation of the workplace; full load, etc.).
2) Reduced material costs.
Take up to 3/5 of the cost structure.
- the use of resource-saving technologies;
- improving the quality of raw materials and materials;
- Decrease in depreciation costs (maximum load, increase in terms).
3) Determination and compliance with the optimal batch size of purchased materials.
It is known that the larger the batch of purchased raw materials, materials, etc., the greater the amount of costs associated with the storage of these raw materials (rent for storage facilities, losses during long-term storage, losses associated with inflation, etc.).
But, there is also an advantage, the costs of placing an order for purchased goods, acceptance of these goods, control over the passage of invoices are reduced.
Topic 6. Costs of the company Plan 1. Economic and accounting costs of the company 2. Isocost and cost-effective output 3. Costs of the company in the short term 4. Criteria for the expediency of the functioning of the company 5. Long-term costs
Economic costs (opportunity costs or lost opportunities) are the benefits that could be obtained with the most beneficial of all alternative ways use of limited resources. ...
Depending on who owns the resources used by the firm, economic costs are divided into explicit (external) and implicit (internal). Explicit (external, accounting) costs - the cost of the borrowed resources used by the firm in actual acquisition prices Implicit (internal) costs - opportunity cost use of resources owned by the firm, taking the form of lost income.
Structure of accounting costs costs of raw materials and supplies; depreciation deductions; rent; debt service costs (amount of interest); operating costs (payments for electricity, heat, operating costs of machines and mechanisms, etc.); labor costs, etc.
Traditional components of internal costs: costs own materials entrepreneur; the cost of its capital resources (buildings and equipment); costs of financial resources belonging to him.
When will an entrepreneur consider the activities of his company effective? This information is provided by the indicator of economic profit. Economic profit (P) is the difference between the firm's revenue (TR = Px. Q) and economic costs(TC is the sum of explicit and implicit costs). P = TR - TC
Conclusions: q. The company operates efficiently if the economic profit is greater than or equal to zero (Peq 0) q The business is unprofitable if the economic profit is negative, regardless of the amount of accounting profit (Peq. 0)
For a given production function q = AK L and a function of total costs - isocoste: TC = PK * K + PL * L, the optimal values of labor and capital are found by the following formulas:
In the short run, costs are divided into fixed and variable Fixed costs (FC) are costs that do not change with the change in output. Variable costs (VC) are costs that change with output. Total costs are equal to the sum of fixed and variable costs: TC = FC + VC
Average costs are costs per unit of output: Average fixed costs - AFC = FC / q Average variable costs - AVC = VC / q Average total costs AC = TC / q = AFC + AVC Marginal costs (MC) - additional costs associated with production of an additional unit of production
Example of cost calculation More accurate calculation option Example: TC = 10 + q 3 + 2 q 2 + 6 q MC = 3 q 2+ 4 q + 6
Production function and cost functions Cost functions are directly derived from the production function. VC = PL * L Hence: Hence:
Production function and cost functions Let us derive the marginal cost function: Since the price of labor, like any other resource, is set in a short period and does not change, then: The marginal product of labor (MPL) is the increment in output by an increment of labor per unit: Therefore:
Production function and cost functions Conclusions: 1. While the limiting and medium products labor increases, the average variables and marginal costs decrease: MPL and APL AVC and MC 2. If the marginal product of labor is constant (and equal to the average product): average variables and marginal costs are also constant: MPL (const) = APL AVC (const) = MC 3 When the marginal and average products of labor begin to fall, the average variable and marginal costs rise. MPL and APL AVC and MC
The law of diminishing returns complicates the cost dynamics. The change in average variables and, consequently, average total costs is uneven, which is reflected in the dynamics of marginal costs.
Criteria for the expediency of the firm's functioning In the long run, such a criterion will be the receipt of non-negative economic profit. For a company operating in the short term, three options are possible: Ø Production in order to maximize profits Ø Production in order to minimize losses Ø Termination of production.
LAC dynamics will depend on the effect of economies of scale of production. Positive economies of scale are observed when the average costs of the firm decrease as production rises. The positive economies of scale are due to the following reasons: as the size of the enterprise grows, the opportunities for taking advantage of specialization in production and management increase; at larger enterprises, highly productive and expensive equipment can be used, investment in research and development work (R&D) can be carried out; large enterprise has more possibilities to diversify production, develop side and auxiliary production, the release of products from the waste of the main production, etc.
Negative economies of scale are observed when the average costs of the firm increase as production rises. It arises in connection with a violation of the manageability of a company that is too large: - the efficiency of interaction between the divisions of the company decreases; - the firm loses flexibility; - it becomes difficult to control the implementation of decisions made by the management of the company; - the costs of transmission and processing of information necessary for decision-making are sharply increasing; - in individual units firms have their own interests and ideas about the development of the unit, which may contradict the overall strategy of the firm's development.
Economies of scale electricity, gas and water supply of the city LAC 1 retail trade, services, agricultural work, clothing, footwear, bakery industries. furniture manufacturing, woodworking
Problem 1 Condition: the function of total costs is given by the formula ТС = 120 + 50 q 2, fixed costs FC = 120. Find the value of marginal and average variable costs for the volume of output q = 12. Solution: TC = FC + VC FC = 120, VC = 50 q 2 AVC = VC / q = 50 q 2 / q = 50 q = = 50 * 12 = 600
Problem 2 Condition: The function of the total costs of the firm is given by the formula ТС = 4 q + 2 q 2 At what price does the firm sell products if the production of 10 units provides the firm with a profit of 6 thousand USD. e.? Solution: P = TR- TC P = p * q - (4 q + 2 q 2) 6000 = P * 10 - 4 * 10 - 2 * 102 10 p = 6000 + 240 P = 624
The basis of the planning methodology is the conduct of analytical research, the preparation of a database, the study and connection of information into a single whole. Planning methods are expressed in methods and techniques for the development of planning documents and indicators in relation to their various types and purposes for management purposes. In addition, planning methods include methods for preparing planned alternatives or at least one alternative.
Planning can be based on traditional methods (normative, balance, calculation and analytical) and improved modern methods using computer technology. Improved planning methods are usually used by large enterprises, and most enterprises (medium and small) carry out planning on the basis of balance sheet and calculation and analytical.
The balance planning method is one of the main methods, which has universal significance as a way of linking needs with resources, i.e., contributing to the solution of one of the critical issues at the enterprise. Balances are subdivided into material, labor and value balances. When developing financial plans, of which cost planning is a part, value balances are used. The balance method is implemented in financial planning when developing a forecast balance. But for the development of real forecast indicators in planning, they rely on the information obtained as a result of the analysis of the achieved value of the indicator, taken as the base one, and the indices of its change in the planning period.
To analyze the planning of costs at a given enterprise, we investigate the dynamics of the forecast, planned and actual costs of the enterprise for the period 2005-2006.
Cost targets for 2005-2006 are presented in table 2.3.
Table 2.3.
Planned cost indicators for 2005-2006.
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Indicators |
Deviation |
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Circulation costs (thousand rubles) |
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Including: |
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Depreciation (thousand rubles) |
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Labor remuneration fund (thousand rubles) |
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Unified social tax (thousand rubles) |
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Land tax (thousand rubles) |
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Electricity (thousand rubles) |
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Phone (thousand rubles) |
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Property protection (thousand rubles) |
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Personnel training (thousand rubles) |
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Property tax (thousand rubles) |
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Other expenses (thousand rubles) |
To analyze distribution costs, we determine the size and rate of change in their level by the formula:
DUIO = UIO 1 -UIO 2 (13)
DUIO - the size of the change in the level of distribution costs,%;
UIO 1 and UIO 2 - reporting and baseline levels of distribution costs,%, respectively.
T and about= UIO 1: UIO 0 × 100% (14)
T and about- rate of change in the level of distribution costs,%.
The data obtained by calculations are presented in table 2.4. in comparison with the actual cost of circulation in 2005 ..
Table 2.4.
Actual cost indicators for 2005-2006.
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Indicators |
Deviation |
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Circulation costs (thousand rubles) |
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Including: |
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Third-party transport (thousand rubles) |
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Own transport (thousand rubles) |
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Depreciation (thousand rubles) |
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Labor remuneration fund (thousand rubles) |
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Unified social tax (thousand rubles) |
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Land tax (thousand rubles) |
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Electricity (thousand rubles) |
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Phone (thousand rubles) |
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Property protection (thousand rubles) |
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Personnel training (thousand rubles) |
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Property tax (thousand rubles) |
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Other expenses (thousand rubles) |
Analyzing the planned and actual costs of the enterprise, the following conclusions can be drawn:
Planned costs in 2005 amounted to 6,630 thousand rubles,
Actual - 6417.0 thousand rubles.
Savings in distribution costs amounted to 213 thousand rubles. or 96.7%
Planned expenses in 2006 amounted to 7200 thousand rubles,
Actual -7064.0 thousand rubles.
Savings in distribution costs amounted to 136 thousand rubles. or 98.1%.
However, the planned costs of 2006 exceed the planned costs of 2005 and amount to 92.1%, the actual costs, respectively, are 6417.9 and 7064.0 or 110.1%.
Let us compare the results obtained in terms of distribution costs with the main indicator of the economic (trade) activity of the enterprise in 2005-06. and build a graph.
The trade turnover in 2005 (3017 thousand rubles) is higher than the volume of goods turnover in 2006 (2590 thousand rubles) by 427 thousand rubles. The rate of change in turnover is 85%.
Fig. 2.3.
The graph (Fig. 2.3.,) Clearly shows the rate of decline in trade in 2006 relative to the indicator of trade in 2005. As you know, the volume of trade is one of the main factors affecting the level and amount of distribution costs. As a rule, the total amount of distribution costs increases, however, at the studied enterprise, the volume of turnover decreased by 85.8%, and distribution costs increased by 110%. Consequently, the rate of change in the level of distribution costs is influenced by other factors, the identification of which is necessary condition when planning distribution costs for subsequent periods. To do this, it is necessary to analyze the distribution costs by item of expenditure.
In fig. 2.4. the graph of the dynamics of profit and income in 2005 - 2006 is presented.
Fig. 2.4.
The amount of income from rent, services and sales in 2005 is lower than the similar indicator of 2006 by 283 thousand rubles. and is 104.3%.
In terms of profit, the situation is similar. Profit received in 2005 is lower than the amount of profit earned by the company in 2006. by 66.6 thousand rubles. (149.3%).
The increase in profit in 2006 relative to 2005 (149.3%) did not lead to a significant increase in the company's income, since with a general decrease in the volume of turnover, income from sales decreased. A significant portion of the company's income comes from rental and service income. Income from the sale of goods:
in 2005 is 830.5 thousand rubles,
rental income and services - 5754.5,
in 2006, income from sales amounted to only 496.0 thousand rubles,
rental income and services - 6372.0. thousand roubles.
Total income grew by 110.7%.
Thus, taking into account the data obtained, the following conclusions can be drawn:
Planning of distribution costs for 2006 was made taking into account the condition when the aggregate of all costs of the enterprise will be covered by gross income and the enterprise will make a profit, therefore, commercial activity as a whole can be considered effective.
The chart clearly illustrates the rate of increase in income and profits in 2006 compared to the same period in 2005.
Let us analyze the cost planning for 2007 further.
The basis for planning distribution costs for 2007 is based on the actual indicators of the size and rate of change in the level of distribution costs in 2006. Analysis of planning distribution costs for 2007 will begin with considering the forecast (expected) indicators, which are considered as planned.
Table 2.5.
Expected indicators of distribution costs per year and per month (2007)
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Indicator (title of articles) |
Actual 2006 |
Expected |
Average monthly costs |
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Own transport |
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Third-party transport |
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Water supply |
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Electricity |
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Heating |
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Removal of household waste |
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Property tax |
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Salary |
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Storage |
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Depreciation |
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Transport tax |
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Land tax |
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Property protection |
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Cashier service |
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Communication services |
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Business trip |
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Stationery costs |
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Postage |
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Information Services |
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Personnel training |
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Other expenses |
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Write-off of O.S. |
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Repair OS |
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Transport repair |
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Table 2.6.
Expected income: (per month), year
If we compare the final indicators of the expected costs in 2007 and the actual ones in 2006, we get the following deviation indicator:
Table 2.7.
Planning distribution costs in 2007
Comparing the obtained indicators, we can conclude that in 2007 a significant reduction in the amount of distribution costs is planned - by 902,410 thousand rubles. In 2007, no expenses are planned for the payment of bonuses, repairs of fixed assets and repairs of vehicles. For other items, the planned or expected costs of 2007 exceed the actual costs of distribution in 2006 (Data in Table 2.5.).
Let's consider the ratio of actual costs for 9 months of 2007 and indicators of turnover and income.
Table 2.8.
The ratio of actual distribution costs and indicators of turnover and income (for 9 months of 2007)
Based on the planned turnover indicator (3762 thousand rubles) for the year, you can calculate the turnover plan for one quarter. To do this, we divide the planned indicator of turnover for the year by the number of quarters. Let's get the planned indicator of turnover for one quarter, which will be:
3762 4 = 940.5 thousand rubles.
therefore, the planned indicator of turnover for three quarters or 9 months of 2007 will be:
940.5 H 3 = 2821.5 thousand rubles.
Comparing the actual implementation of the turnover for 9 months with the planned one, we get 2821.5 - 2389.6 = 432, thousand rubles. or 84.7%, i.e. the turnover plan has not been fulfilled in full.
Thus, 15.3% of the turnover is carried over to the fourth quarter. The volume of trade in the fourth quarter will be:
3762 thousand rubles - 2389.6 thousand rubles. = 1372.4 thousand rubles.
In order to fulfill the annual turnover plan, it is necessary to increase the speed of turnover in the last quarter of the year.
Let's analyze the profit indicators.
The planned profit figure is 150 thousand rubles, for 9 months the profit was 120 thousand rubles, respectively, the profit for the fourth quarter should be 30 thousand rubles. The target profit target is 80% fulfilled.
The planned income for 2007 is -10102.8 thousand rubles,
If the income for one month is 841.9, then for 9 months this indicator can be calculated as follows:
841.9 H 9 = 7577.1 thousand rubles.
Implementation of the plan - 10102.8 -7577.1 = 2525.7 thousand rubles.
Let's calculate the level of fulfillment of the planned income indicator:
7577.1 / 10102.8 × 100 = 75%
Actual income for 9 months amounted to 5817.0. thousand roubles.
7577.1 - 5817.0 = 1760.1 thousand rubles. (0.8%)
Circulation costs for 9 months of 2007, as already mentioned above, amounted to 6729.0 thousand rubles, while the average monthly indicator of distribution costs is 453.8. For nine months, the expected costs should be 4084.2 thousand rubles. Consequently, the growth rate of distribution costs for 9 months was:
4084.2 6789 H 100 = 60.7%.
This indicator shows that the actual costs for 9 months of the current year are significantly higher than expected. The growth of distribution costs per month is 6.7%.
The obtained indicators are summarized in table 2.7.
Table 2.7.
The level of fulfillment of the 2007 targets.
Table 2.7 shows that the company has a negative result in terms of turnover, distribution costs and income, but nevertheless, the company received a higher profit than it was provided for by the plan.
Analysis of the planning of distribution costs and the results of the enterprise's activities allows us to draw the following conclusions:
Like many other businesses retail, which can be classified as small or medium-sized, the management of OJSC Promtovary believes that its commercial activity is effective if all the total and non-segregated costs incurred by the company for a certain period are covered by gross income, and even remain profit. On the one hand, this approach is justified. Since the company is in principle “in the black”. However, this approach does not answer the questions:
Can a business make more money ?,
How do certain categories and types of goods work and how profitable are they?
With this approach, it is difficult to talk about how long and stable the company will be profitable.
The advantage of this approach, based on the sum method of accounting for costs, is its ease of use and low cost, since no expensive specialists and computer programs are required.
The disadvantage of the sum method of accounting for costs is the impossibility of obtaining maximum profit, the impossibility effective management assortment, planning and cost optimization.
When planning distribution costs, no cost analysis is carried out, factors causing an increase in distribution costs are not identified, and sources of cost optimization are not identified.
Analyzing planning documents, it is impossible to determine for what reasons the volume of turnover has been reduced, there is no justification for refusing to plan costs for bonuses and staff incentives. The planning of distribution costs is coordinated with the planning of income and profit, but at the same time, income is planned not from the sale of goods, but from rent and services. Accordingly, we can conclude that the company, when planning, does not analyze trading activities and does not plan to revive and optimize it.
This conclusion is confirmed by the results obtained in the analysis of the planning of distribution costs and the actual results of the enterprise. 2005-2006 and 9 months 2007
The diagram shows the dynamics of changes in the planned and actual costs of the enterprise for 2005-2006. and 9 months 2007
Fig. 2.5.
The diagram shows that only in 2005 the actual distribution costs do not exceed the planned ones, and in 2006 and during 9 months of 2007 the actual distribution costs are higher than the planned ones.
The main source of income for the enterprise is income from rent and services, and not income received from the sale of goods (trading activity as the main activity).
Circulation costs, as a rule, increase with increasing turnover, but the turnover at the enterprise decreases, therefore, the increase in costs is associated with other factors. Nevertheless, in 2007 the planned distribution costs are significantly lower than the planned ones.
