What is the cost? Main types of production costs of production and them.

Permanent and variable costs are the costs that the company carries for the production of goods, works or services. Their planning makes it possible to more efficiently use the available resources, as well as predict activities for the future.

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Permanent costs remain unchanged if the organization reduces production. In this case, the share of permanent costs will grow per unit of production. Conversely - with an increase in production volumes, the share of constant cost per unit produced products will decrease. This indicator is the average constant cost (AFC).

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

Picture 1. Schedule of direct expenses

Variable costs

Cost variables depend on increasing or decreasing production. If the organization increases the amount of products, respectively, the costs of the materials and resources necessary for this are increasing.

Examples of variable costs:

1. Wages of workers with a piece of remuneration system.
2. Costs of raw materials and materials.
3. Transportation costs for the delivery of products to the consumer.
4. Electricity costs, etc.

Even on the topic:

What will help: Find out what expenses should be reduced. It will tell how to conduct an audit of business processes and cost inventory, how to motivate employees to save.

What will help: Prepare in Excel Report on the expenses of the Group of Companies in the required detail - on business units, areas, articles and periods

Variable costs change depending on the changes in production. With an increase in the amount of production produced, variable costs will grow and, on the contrary, with a decrease in the amount of products manufactured - decrease. Cm. .

The schedule of variable costs has the following form - Fig. 2.

Figure 2.. Schedule of variable costs

At the initial stage, the increase in variable costs is directly related to the amount of product produced. Gradually, the increase in variable costs is slowed down, which is associated with cost savings during mass production.

General costs

The amount of all expenses, permanent and variables that the organization spends on the production of goods or services, is called total costs (TC - TOTAL COSTS). They depend on the amount of production volumes and costs spent on the production of resources. Graphically common costs (TC) look as follows - Fig. 3.

Figure 3.. Schedule of permanent, variables and total costs

Example of calculating constant and variable costs

OJSC "Sewing Master" is engaged in tailoring and selling clothing wholesale and retail. At the beginning of the year, the organization won the tender and concluded 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 has carried the following costs during the year (see Table).

Table. Cost of the company

View of expenses	Amount, rub.
Rent a sewing shop	50 000 rubles. in the month
Depreciation duties according to accounting data	48 000 rub. per year
Interest on the loan for the purchase of sewing equipment and the necessary materials (tissue, threads, sewing fittings, etc.)	84 000 rub. per year
Communal costs for electricity, water supply	18 500 rubles. in the month
Cost of materials for sewing overalls (fabric, threads, buttons and other fittings)
The work of the workers (workshops of the workshop amounted to 12 people) with average wages of 30,000 rubles.	360 000 rub. in the month
Payment of administrative staff (3 people) with an average salary of 45 000 rubles.	135 000 rub. in the month
Cost of sewing equipment

To constantly spending:

• rent for a sewing shop;
• depreciation deductions;
• payment of interest on the loan for the purchase of equipment;
• the cost of the most sewing equipment;
• payment of the administration.

Calculation of permanent costs:

FC \u003d 50000 * 12 + 48000 + 84000 + 500000 \u003d 1 232 000 rubles per year.

Calculate the average permanent costs:

To variable costs, we will include the cost of raw materials and materials, remuneration of workers of the sewing workshop and utility bills

VC \u003d 200000 + 360000 + 18500 * 12 \u003d 782 000 rubles.

The average cost variables will be:

The amount of constant and variable costs will give total costs:

TC \u003d 1232000 + 782000 \u003d 20 140 00 rubles.

Medium total costs are calculated by the formula:

RESULTS

The organization only started sewing production: rent a workshop, acquired sewing equipment on credit. The magnitude of constant costs at the initial stage is significant. Plays the role and the fact that the volume of production is still low - 5,000 units. Therefore, constant costs are still dominated by variables.

With an increase in production volumes, constant costs will remain unchanged, but will grow variables.

Analysis and planning

The cost planning allows the organization rationally and with greater efficiency to use available resources, as well as predict their future activities (concerns short-term period). The analysis is also necessary in order to determine where the most costly costs of expenses and how can be saved on the production of goods.

Savings on permanent and variable costs reduces the cost of production - an organization can establish a lower price on its products than earlier, which increases product competitiveness in the market and increases the attractiveness in the eyes of consumers (

Any firm functions for generating income, and its work is impossible without the funds spent. There are various types of such expenses. There are activities for which permanent finances are required. But part of the costs are not regular, and it is also necessary to take into account their impact on the course of product release and its sale.

So, the main meaning of the work of any company in the production of the product and receive income at the expense of it. To start this activity, you need to buy raw materials at the beginning of the raw material, to hire labor. This is spent on certain finances, in the economy they received the name of costs.

People invest Finance in production activities with the most different goals. In accordance with this, the classification of expenses was adopted. Categories of costs (depending on properties):

• Obvious. Such costs are made directly to pay employees, commission to other organizations, payment of banks and transport.
• Implicit. The costs of the needs of the company's heads that are not spelled out in contracts.
• Permanent. Funds that are provided continuous production processes.
• Variables. Costs, without problems to be adjusted while maintaining the same level of product output.
• Irretrievable. Expenses of movable assets that are invested in the company's activities free. Infected the initial period of production or republication of the organization. These funds are no longer possible to spend on other organizations.
• Middle. The costs obtained during the calculations characterizing attachments into each product unit. This indicator contributes to the pricing of goods.
• Limit. This is the greatest amount of costs that is not subject to increasing due to the low efficiency of capital in the company.
• Appeals. The cost of supplying goods from the manufacturer to the consumer.

Application of constant and variable costs

Consider the differences of constant costs from variables, their economic characteristics.

First cost (constant) Designed for investment in the manufacture of a product in a separate production cycle. In each organization, their size is individual, therefore the company considers them separately, given the analysis of the issue process. We note that such costs will not differ from the initial production stage to the sales of products to the consumer.

Second Type of Costs (Variables) varies in each production cycle, almost without repetitions of this indicator.

Two types of costs in aggregate constitute the total costs that are calculated at the end of the production process.

Simply put, continuous costs - those that are unchanged at a certain period of time. What can be attributed to them?

1. Payment of utilities;
2. Costs for the operation of premises;
3. Payment of rental;
4. Salary staff staff;

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

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

1. Energy costs;
2. Material expenses;
3. Contract labor payment.

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

Examples of costs:

Each production cycle corresponds to a specific amount of expenses remaining unchanged under any conditions. There are other costs depending on production resources. As it was previously established, the costs for a short time interval are variable and constant.

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

Examples of permanent costs

Permanent costs remain at the same level with any volume of product release, in a small time interval. These are the cost of stable factors of the company, not proportional to the number of units of goods. Examples of such expenses are:

• payment of interest on a bank loan;
• depreciation costs;
• payment of interest on bonds;
• salary managers in the enterprise;
• insurance costs.

All expenses not dependent on the production of the product, which in a small period of production cycle are unchanged, can be called permanent.

Examples of variable costs

The variables, costs, on the contrary, are essentially investment in the release of goods, therefore depend on its volume. The size of the investment is directly proportional to the number of produced goods. Examples can serve as expenses for:

• on raw materials;
• paying premiums to employees producing products;
• delivery of materials and the product itself;
• energetic resources;
• equipment;
• other expenses for the production of goods or services.

Consider a schedule of variable costs, which is a curve. (Figure 1.)

Fig.1 - schedule of variable costs

The path of this line from the start of coordinates to the point A is depicting an increase in costs with the increase in the number of produced goods. Plot AV: more rapid increase in costs in mass production. The transparency costs of transport or consumables can be affected by the costs of transport or consumables, improper use of the released goods with reduced demand for it.

An example of calculating production costs:

Consider the calculation of constant and variable costs on a specific example. Suppose a shoe company produces 2000 pairs of boots during the year. During this time, the factory spends funds for the following needs:

• rent - 25000 r.;
• interest on bank loan - 11000 p.;
• payment for the production of one shoe pair - 20 r.;
• raw materials for the release of a pair of boots - 12 p.

Our task: to calculate variables, constant costs, as well as funds spent on each pair of shoes.

Permanent costs in this case can only be called rent and credit payments. Such expense expenses, depending on production volumes, so calculate them simply: 25000 + 11000 \u003d 36,000 rubles.

Expenditure on the production of one shoe pair is variable costs: 20 + 12 \u003d 32 rubles.

Consequently, the annual costs costs are calculated as follows: 2000 * 32 \u003d 64000 rubles.

General costs - This is the sum of variables and constant: 36000 + 64000 \u003d 100,000 rubles.

The average size of total expenditures per shoe pair: 100000/20 \u003d 50

Planning production costs

For each company it is important to calculate correctly, plan and analyze production costs.

In the process of expense analysis, options for the cost-effective use of finance, which are invested on the production of products and should be distributed correctly. This leads to a decrease in cost, which means the final price of the manufactured goods, as well as improving the competitiveness of the company and the growth of its income.

The task of each company is to save maximize in 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 increases, which means there are more opportunities to invest in it.

To schedule production costs, you need to take into account their size in previous cycles. In accordance with the volume of manufactured goods, a decision is made to reduce or increasing production costs.

Accounting balance and costs

Among the accounting documentation of each company there is a "profit and loss statement". There are fixed all information about expenses.

A little more about this document. This report does not characterize the property position of the enterprise in general, and provides information on its activities for the selected time interval. In accordance with OKUD, the income statement has the form 2. In it, income and expenses and spending indicators are recorded in the incident and by the end of the year. The report includes a table, in the 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 the 26 account. The latter are travel costs, payment for the protection of premises and labor, employee remuneration. The line 070 shows the interest of the company on credit liabilities.

The initial results of computing (when drawing up a report) are divided into direct and indirect costs. If we consider these indicators separately, the direct costs can be considered permanent costs, and indirectly variables.

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

Accounting costs (differently called explicit) - This is paid in the monetary equivalent of any transactions. They have a close relationship with economic costs and income of the company. Executive costs will be submitted from the company's profits, and if we get zero, it means the organization most correctly applied its resources.

Example Calculation of expenses

Consider the 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 per year. For this, he will have to cover the costs:

• rental of premises - 30000 p.;
• salary of administrators - 20000 p.;
• purchase of technology - 60000 p.;
• other minor costs - 15000 r.;

Credit payments - 30%, deposit - 25%.

Equipment The head of the enterprise bought at his own expense. Washing machines are subject to breakage, after a while. Given this, you need to create a depreciation fund, which will be listed for 6,000 rubles each year. All of the above - explicit costs. Economic costs are the possible profit of the laundry service, in case of acquiring a deposit. To pay initial spending, he will have to use a bank loan. Credit for the amount of 45000 rubles. It will cost him at 13500 rubles.

Thus, we calculate the explicit costs: 30 + 2 * 20 + 6 + 15 + 13.5 \u003d 104.5 thousand rubles. Implicit (deposit percentage): 60 * 0.25 \u003d 15 thousand rubles.

Accounting: 120-104.5 \u003d 15.5 thousand rubles.

Economic income: 15.5-15 \u003d 0.5 thousand rubles.

The costs of accounting and economic are distinguished from each other, but they are usually considered in aggregate.

The value of production costs

Production costs form the law of economic demand: with an increase in the price of products, the level of its market supply is growing, and with a decrease - the proposal is reduced, while maintaining other conditions. The essence of the law is that each manufacturer wants to offer the maximum number of goods at the highest price, which is most profitable.

For the buyer, the cost of goods is a deterrent. The high price of goods causes the consumer to buy its smaller amount; And accordingly, cheaper products are purchased in large volumes. The manufacturer receives a profit for the released product, so he seeks to produce it in order to acquire revenue from each unit of goods, in the form of its price.

What is the main role of production costs? Consider it on the example of the manufacturing industrial enterprise. At a certain period of time, production costs increase. To compensate them, you need to raise the price of the product. The cost increase is due to the fact that it is impossible to quickly expand the production area. Equipment is overloaded, which reduces the efficiency of the enterprise. Thus, for the release of goods with the highest costs, the firm must establish a higher price for it. The price and level of proposal are directly interrelated.

Any entrepreneurial activity is associated with the inevitable costs (costs) of production.

Costs (costs) of production - These are the cost of the manufacturer (owner of the company) for the acquisition and use of factors of production.

Alternative costs They are the value of other goods that could be obtained with the most advantageous of all possible ways to use this resource. They are more accounting costs By magnitude implicit costs.

Types of costs (costs):

1) Insidetrennaya (implicit) - The cost of its own resource (equal to cash payments that could be obtained for their own resource used if his owner has invested him in someone else's business).

2) External (explicit, accounting) - payments to suppliers of labor resources, raw materials, fuels, services, etc. (the amount of cash payments that the company carries out to pay for the necessary resources).

External costs, in turn, are divided into:

1) Permanent costs - that part of the total costs that does not depend on the volume of the production volume (rent of the company for the premises, the cost of maintaining the building, the cost of training and retraining of personnel, wages of management personnel, utility costs, depreciation - gradual cutting basic funds). Permanent costs The company bears even if it does not work.

2) Variable costs - That part of the total costs, the value of which for this period of time is directly dependent on the volume of production and sales of products (the acquisition of raw materials, wage, energy, fuel, transportation services, costs of container and packaging, etc.). Variable costs change with any oscillation volumes of goods output and in the same direction (increasing with increasing volumes and fall when they are reduced).

Medium cost - These are the costs of a company per unit of products.

The average costs are shown in which the company costs the production of one unit of products.

Economic profit - This is the difference between the total revenue of the firm and economic costs.

Accounting profit - This is the difference between the overall revenue and accounting costs.

Expand

Questions:

1. (1-6). Use the text and execute the tasks 1-6.

Some firms prefer to sell their goods not in the usual way, through shops and outlets, but use special distributors agents. So implement their products some perfumery and cosmetic companies, firms - manufacturers of food additives. The main feature of this method of product implementation is the direct contact of the representative of the company with buyers. The sales system of goods through distributors-consultants was called "Network Marketing".

For buyers, such distribution is as follows. The distributor offers the client a full range of products of a certain company. At the same time, the seller acts as a consultant. He knows everything about the features of each company's product and is ready to talk for hours about its properties, give to try any product, pick up what is suitable for a specific customer, exchange unlikely, to provide discounts.

Now let's try to look at the network marketing system from the inside. Why do the firms resort to such a product distribution system and why are network marketing agents turn out to be such interested sellers?

This sales is focused on personal work with the buyer. The company convinces the buyer that its product must be selected individually, so it cannot be sold in the store. For the same to understand what drives distributors, it is worth paying attention to the word "network". Indeed, distributors are a network, and this network is built on the principle of the pyramid. The responsibility of the agent is to take the goods monthly to a certain amount. He receives an income from each goods sold. Therefore, he's blood interested in selling goods - from how much it will certainly depends the thickness of his wallet. In addition to selling, the agent is interested in visiting the buyer too to become a seller. As soon as he managed, the company begins to pay the agent percentage of all sales of the new seller. Agents receive additional income, and the firm expands at the expense of new distributors.

Pyramid of network marketing is similar to Financial. It is based on the principle of geometric progression. People who are on its top and simply receiving income from the work of the agents involved are significantly less than direct distributors. But, in contrast to the financial pyramid, it is not built on the deception of buyers. Everyone himself decides for himself, to become a agent or not.

(Based on encyclopedia for schoolchildren)

1) Make a text plan. To do this, highlight the main semantic fragments of the text and encroach each of them.

In the correct response, the Plan points must correspond to the basic semantic fragments of the text and reflect the basic idea of \u200b\u200beach of them.

The following semantic fragments can be allocated:

1) Features of selling goods through distributors' agents;

2) Network Marketing Mechanism;

3) Network Marketing and Financial Pyramid.

Other formulations of the points of the plan are possible, not distorting the essence of the main idea of \u200b\u200bthe fragment, and the allocation of additional semantic blocks.

2) What is the main feature of the sale of goods through the distributor agents? What are the advantages, according to the authors of the text, gives consumers a similar way to acquire goods?

1) Main feature: direct contact of the representative of the company with buyers;

2) Advantages: "The seller acts as a consultant. He knows everything about the features of each company's product and is ready to talk for hours about its properties, give to try any product, pick up what is suitable for a specific client, exchange unlikely to provide discounts. "

The elements of the response can be given in other, similar to the meaning of the wording.

3) Using the text, explain why a) firms and b) agents are interested in the network distribution system.

The following explanations of agents and firms may be given:

1) the agent receives an income from each sold unit sold and from sales of all the promoter agents attracted by him;

2) The company convinces the buyer that its product must be selected individually, so it cannot be sold in the store.

Other explanations may be given.

4) Why is perfumery and cosmetic goods and biologically active food additives most often for sale on a network marketing system? With support for text and personal social experience, express three assumptions.

The following assumptions can be made:

1) in the selection of cosmetics and biodeadows to food especially needed detailed advice and individual selection of goods;

2) cosmetics and biographic supplements to food - goods of everyday demand, and often buyers for many years acquire products by the same company you like;

3) Cosmetics and biographic supplements to food are usually compact and do not occupy a lot of space.

Other assumptions may be made.

5) What advice on how not to become a victim of network marketing agents, could you give the buyer? With support for the facts of public life and personal social experience, formulate three councils.

The following tips may be given:

1) It is necessary to make sure that the product offered by the agent is really needed;

2) Before making a purchase, it is necessary to explore the range of stores (or specialized sections), prices for which goods are selling there similar to those that offer network marketing agent;

3) It is necessary to find out all the information about the product and the manufacturer.

Other tips may be given.

6) Do you agree that the pyramid of network marketing is significantly different from the financial pyramid attitude to the buyer (client)? With a support for text and social scientific knowledge, bring two arguments (explanations) in defense of their position.

The correct answer must contain the following items:

1. The opinion of the student: consent or disagreement with the position expressed:

2. Two arguments (explanations), for example:

in the case of consent, it may be indicated that

1) The buyer does not just give money in anticipation of significant interest, but acquires the goods you need;

2) Buyers and new distributors' agents are free in their choice;

in case of disagreement (i.e., opinions as network marketing, and financial pyramids are deceived by customers) may indicate that

1) firms and agents interested in the sales of goods are often deceived by potential customers, providing unreliable information about the unique properties of the goods;

2) new distributors agents attract with unrealistic promises of significant benefits, and the principle of attracting new agents the same as the clients of financial pyramids.

Other arguments (explanations) can be given.

There are still questions on accounting and taxes? Ask them on the accounting forum.

Continuous costs: details for accountant

• Operational lever in the main and paid activities

  The limit (threshold) does not cause height of constant costs. The operating lever (operating leverage) shows ... a change in the amount of services provided. Conditionally constant costs are the costs whose value with ... Consider the example. Example 1 The constant costs of the educational institution are 16 million ... the threshold in which the increase in constant costs will be required. With a favorable macroeconomic atmosphere ... Activities) increases, in conditions of constant constant costs, it receives savings (profit); ...

• State Finance: Examples of Calculations

  Which it is created. Variables and constant costs if you break the financial support formula ... per unit of services; C post - constant costs. This formula is based on the assumption ... the board of the main personnel). The value of conditionally permanent costs when changing the amount of services remains ... quantity. Therefore, the coating of the founder of the constant costs of the bu can be qualified as non-market ... property. How reasonably this distribution of constant costs? From the position of the state - this is true ...

And deductions to the funds). Conditionally constant costs include overall and generality expenses ... Examples. In this case, variables and constant costs in relation to the tax return resemble ...

• Does it make sense to share the costs of variables and constant?

  Variables indirect costs and part of the constant costs depending on the utilization rate ... The level of reimbursement of constant costs and profits. With equality of constant costs and amounts ... between production, variable and constant costs. The break-even point can be ... Simple direct-cob constant (conditionally permanent) costs are collected in integrated accounts (... it variables and constant costs. There are the following options for the distribution of constant costs of a specific ...

• Dynamic (temporary) profitability threshold model

  ... "German metallurgy" first mentioned the concepts of "constant costs", "variable costs", "progressive costs", ... σ Fc - cumulative constant costs corresponding to the production of q units of products ... From the schedule it is seen as the following. The permanent costs Fc change according to the change in the intensity ... R), respectively, the cumulative costs, constant costs, variable costs and sales. The above ... period of sales of the goods. FC - constant cost per unit time, VC - ...

• Good politician goes ahead of events, they are bad for themselves

  It is formed as a function of variables and constant costs, and therefore in variables of marginal ... (thousand rubles per unit of goods); - constant costs (in thousand rubles); - variable costs ... composition costs of such a component as constant costs, which I have already mentioned ... In the cost of the cost of goods, the presence of constant costs, then the schedule in Fig.11 ... did not take into account the presence of constant costs), and this It becomes cause ...

• Actual strategic and tactical tasks of the management team of the enterprise

  Product implementation); Permanent and conditionally constant costs of production and sales of products ... products; SPOS - Permanent and conditionally constant costs of an enterprise on the production of products. If ... Conditional variables, permanent and conditionally constant costs of production of a unit of products or ..., as well as constant and conditionally constant costs of production and sales of products ...

• Director's questions to which Glavbukh must know the answers

  Its definitions will make equality: revenue \u003d constant costs + variable costs + operating profit. We ... in units of products \u003d constant costs / (price - variable costs / units.) \u003d Continuous costs: marginal profit on ... products products \u003d (constant costs + target profit): (price - variable costs / units.) \u003d (constant costs + target profit ... price. So, equation is true: price \u003d ((constant costs + variable costs + target profit) / target ...

• What do you know about the general expenditure?

  The types of goods excluding conditionally constant costs are equal to 2,000,000 rubles ...

• Pricing features in crisis

  The service should cover variables and constant costs, as well as ensure an acceptable level ... Unit of services; S post - conditionally constant costs for the entire amount of services; Pribe ... Costs, in which constant costs and profits are not covered, - albeit ... to use this tactic, because the founder bears part of the constant costs of AU. Below ... - 144 thousand rubles. in year; The constant costs of paid groups are 1,000 ... organizations. Lack of or low value of constant costs. While business ...

• Economic and social consequences of short-use production and commercial opportunities

  ...), where ZPOS is constant and conditionally constant costs of producing products in the enterprise ...

• The financial analysis. Some provisions of the methodology

  Production and implementation. As part of the constant costs, allocate by individual positions of the article & quot ... Costs permitter Margin profit Marzhprib Permanent costs including: post-sorted depreciation ... interest for loans for interest Other constant costs PRS profits from the main activity ...

• Analysis of the financial condition of the company. Chapter II. Analysis of the financial condition on the example of an industrial enterprise

  Additional financial resources. Fixed Charge Coverage Coverage (Fixed Charge Coverage) is shown like ... than percent coating coefficient). For constant costs include percentage and long-term rental ... as follows: Coefficient coatings of constant costs \u003d Ebit (32) + "Rental contributions" (30 ... In 1993, the coating coefficient of constant costs of the "Cavoplast" decreased in 1993 ...

• Rationalized information system for analyzing and control of the main results of the work of the enterprise

  ORF products are permanent and conditionally constant costs of manufacturing and sales of products ...

• Construction of management accounting based on IFRS reporting

  Direct and indirect, variable and constant costs), the correct definition of the so-called drivers ...

In order to understand what costs are, and before will plunge into this topic, let's figure out in detail with this concept and understand what costs differ from the cost of company and payments.

So let's imagine that the firm needs to buy ten cubes of the forest, for the production of furniture. In order to buy this resource, the firm will have to make expenses and buy goods at a related price.

Note 1.

Note that the signing of the contract does not mean that the company has already incurred expenses. Only on the transfer of money for goods, expenses will be taken into account. This fact of money transfer and called payment.

However, the fact of buying a product, in our case - ten cubes of the forest, does not mean that this resource will be used in production, for the needs of the company. It is likely that the purchased resources will fall onto the store for storage and for future use.

Only when the purchased resources will be used by the firm, they can be called costs. Thereby, costs - These are the costs that are directly related to the production of goods. In accounting, they are displayed in the form of cost.

Costs include:

• Material costs;
• Wage costs;
• Interest on loans.

The costs of the enterprise are divided into external costs and internal.

External costs. External costs include the costs of production that were spent outside the company, that is, the cost of external counterparties. For example, it may be a wage paid by the worker, payment for the acquired raw materials.

Internal costs. Costs only within the company, without costs for workers who are not located in the company. The costs of legal entities are not taken into account. As an example of internal costs, costs can be attributed to improving the qualitative characteristics of certain products.

Consider permanent and variables Costs of the company.

In order to understand the difference between permanent and variable costs in detail, compare the costs of materials and costs for the production premises.

Naturally, the materials, and the production premises are an integral part for the production of products. However, the materials will lose their appearance, turning into finished products or waste production, and the room will be almost unchanged with all the standing equipment.

Note 2.

So, the more finished goods need to produce, the more raw materials spend. So, for the production of $ 10 $ doors, one cube of forest will need for $ 50 doors - five forest cubes, and in order to make $ 100 $ wooden doors, stretch ten cubes.

Now let's look at the production room - the workshop for the manufacture of doors. Suppose that the workshop initially was based on the calculation of the production of $ 100 of the doors per month.

But if, for example, due to a decline in demand in the workshop, a non-$ 100 $ will be produced, and $ 90 $ doors per month, its dimensions will not change, the equipment will remain the same in their places.

It is changes in the volume of resource consumption that changes in production volumes and served to delimit the costs of permanent and variables.

Definition 1.

Permanent costs - These are the costs that do not change in the short-term period, with small increases in production volumes. Permanent costs include rent, equipment maintenance costs, administrative costs.

Example 1.

As an example, in the case of a plan for an increase in the production of doors by 10%, to build a new shop and equipment is impossible in the short term. That is, the increase in production will be achieved without increasing constant costs. The increase in production will affect wages, raw materials and electricity costs, and these are already variable costs.

Definition 2.

Variable costs - This is the costs that can be changed in any short-term period. Next, these costs can grow or decrease, depending on production volumes. The variable costs relates wages, the cost of electricity and the purchase of raw materials. So, for example, in order to increase the volume of production in the short term, the cost variables increase. For example, the staff work time increases, thereby raising wages, electricity fees.

So, we understand that costs are raw materials, which is used for the production of goods, products. The purchased raw material, which is located in the firm warehouse, is called reserves and is not costs until its application.

In addition, it is customary to divide costs for:

Picture 1.

Direct and indirect costs

The presented classification of the costs of the company is used when considering the question of the fact of attributing them to a certain type of product or on a specific division (shop) of the enterprise. As a result, costs are distributed to direct and indirect.

The main and characteristic difference between direct and indirect costs It is that direct costs are directly related to the production of specific products or goods, due to which they will be included in the cost.

Indirect costs are associated with the production of simultaneously several types of products, so it is impossible to directly allocate that part of the costs that fall on a specific type of product.

To estimate the cost of one single type of product in the general commodity nomenclature of the enterprise, indirect costs must be distributed by types of products with the help of any principle. This distribution is conditional, because in detail such distribution is impossible due to the complexity and stochasticity of the process of formation of total costs. But in any case, this task must be solved, since, otherwise, it will not be possible to establish the cost of the heading.

The table clearly shows which items of expenses can be attributed to direct costs and indirect.

Figure 2. Articles of the cost of direct and indirect costs of the enterprise

In order to understand how important the costs in the activities of the enterprise, we will remind one simple goal of the business, is a profit. And costs are directly the costs, thanks to which this goal is achieved.

From dividing expenses to alternative and accounting, the classification of costs for explicit and implicit.

Explicit costs Determined by the amount of the expenses of the enterprise to pay external resources, i.e. Resources that are not owned by this company. For example, raw materials, materials, fuel, workforce, etc. Implicit costs are determined by the cost of internal resources, i.e. Resources owned by this company.

Implicit costswhich are part of economic costs, should always be taken into account when making current decisions. Explicit costs are alternative costs that make the form of cash payments to suppliers of factors of production and intermediate products.

The explicit cost includes:

1. wages workers
2. cash costs for buying and renting machines, maidening, buildings, structures
3. payment of transportation costs
4. communal payments
5. payment of material resource providers
6. payment of services of banks, insurance companies

Definition 3.

Implicit costs - these are alternative costs of using resources belonging to the company itself, i.e. Unpaid costs.

Implicit costs can be represented as:

• cash payments that could receive a firm with a more advantageous use of resources belonging to it;
• for the capital owner, implicit costs is the profit, which he could receive, invested his capital not in this, but to some other business (enterprise).