Costs(cost) - the cost of everything that the seller has to give up in order to produce the goods.

To carry out its activities, the company incurs certain costs associated with the acquisition of necessary production factors and the sale of manufactured products. The valuation of these costs is the firm's costs. Most economically effective method production and sale of any product is considered to be such that the company’s costs are minimized.

The concept of costs has several meanings.

Classification of costs

• Individual- costs of the company itself;
• Public- the total costs of society for the production of a product, including not only purely production, but also all other costs: protection environment, training of qualified personnel, etc.;
• Production costs- these are costs directly associated with the production of goods and services;
• Distribution costs- related to the sale of manufactured products.

Classification of distribution costs

• Additional costs circulation includes costs for bringing manufactured products to the final consumer (storage, prepackaging, packing, transportation of products), increasing final cost goods.
• Net distribution costs- these are costs associated exclusively with acts of purchase and sale (payment of sales workers, keeping records of trade operations, advertising costs, etc.), which do not form a new value and are deducted from the cost of the product.

The essence of costs from the perspective of accounting and economic approaches

• Accounting costs- this is a valuation of the resources used in the actual prices of their sale. The costs of an enterprise in accounting and statistical reporting appear in the form of production costs.
• Economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use. Essentially all costs are opportunity costs. The economist's task is to choose the most optimal option for using resources. The economic costs of a resource chosen for the production of a product are equal to its cost (value) under the best (of all possible) use case.

If an accountant is mainly interested in assessing the company’s past activities, then an economist is also interested in the current and especially predicted assessment of the firm’s activities, searching for the most optimal option use of available resources. Economic costs are usually greater than accounting costs - this is total opportunity costs.

Economic costs, depending on whether the firm pays for the resources used. Explicit and implicit costs

• External costs (explicit)- these are the costs in cash that the company makes in favor of suppliers of labor services, fuel, raw materials, auxiliary materials, transport and other services. In this case, the resource providers are not the owners of the firm. Since such costs are reflected in the balance sheet and report of the company, they are essentially accounting costs.
• Internal costs (implicit)— these are the costs of your own and independently used resource. The company considers them as the equivalent of those cash payments that would be received for an independently used resource with its most optimal use.

Let's give an example. You are the owner of a small store, which is located on premises that are your property. If you didn’t have a store, you could rent out this premises for, say, $100 a month. These are internal costs. The example can be continued. When working in your store, you use your own labor, without, of course, receiving any payment for it. With an alternative use of your labor, you would have a certain income.

The natural question is: what keeps you as the owner of this store? Some kind of profit. The minimum wage required to keep someone operating in a given line of business is called normal profit. Lost income from the use of own resources and normal profit in total form internal costs. So, from the standpoint of the economic approach, production costs should take into account all costs - both external and internal, including the latter and normal profit.

Implicit costs cannot be identified with the so-called sunk costs. Sunk costs- these are costs that are incurred by the company once and cannot be returned under any circumstances. If, for example, the owner of an enterprise incurs certain monetary expenses to have an inscription made on the wall of this enterprise with its name and type of activity, then when selling such an enterprise, its owner is prepared in advance to incur certain losses associated with the cost of the inscription.

There is also such a criterion for classifying costs as the time intervals during which they occur. The costs that a firm incurs in producing a given volume of output depend not only on the prices of the factors of production used, but also on which production factors are used and in what quantity. Therefore, short- and long-term periods in the company’s activities are distinguished.

The goal of any enterprise is to earn maximum profit, which is calculated as the difference between income and total costs. Therefore, the financial result of a company directly depends on the size of its costs. This article describes the fixed, variable and total costs of production and how they affect the current and future operations of the enterprise.

What are production costs

Production costs refer to the monetary costs of acquiring all the factors used to manufacture a product. Most effective way production is considered to be the one that has the minimum cost of producing a unit of goods.

The relevance of calculating this indicator is associated with the problem of limited resources and alternative use, when the raw materials used can only be used for their intended purpose, and all other ways of their use are excluded. Therefore, at each enterprise, an economist must carefully calculate all types of production costs and be able to choose the optimal combination of factors used so that costs are minimal.

Explicit and implicit costs

Explicit or external costs include expenses incurred by the enterprise at the expense of suppliers of raw materials, fuel and service contractors.

Implicit, or internal, costs of an enterprise are the income lost by the company due to independent use resources belonging to it. In other words, this is the amount of money that the company could receive if the best way use of the existing resource base. For example, distract specific type material from the production of product A and use it to manufacture product B.

This division of costs is associated with different approaches to their calculation.

Methods for calculating costs

In economics, there are two approaches that are used to calculate the amount of production costs:

1. Accounting - production costs will include only the actual costs of the enterprise: wages, depreciation, social contributions, payments for raw materials and fuel.
2. Economic - except real expenses, production costs include the cost of lost opportunities for optimal use of available resources.

Classification of production costs

There are the following types of production costs:

1. Fixed costs (FC) are costs, the amount of which does not change in the short term and does not depend on the volume of manufactured products. That is, with an increase or decrease in production, the value of these costs will be the same. Such expenses include administration salaries and premises rental.
2. Average fixed costs (AFC) are fixed costs that fall per unit of manufactured products. They are calculated using the formula:

• SPI = PI: Oh,
  where O is the volume of production output.

  From this formula it follows that average costs depend on the quantity of goods produced. If the company increases production volumes, then overhead costs will correspondingly decrease. This pattern serves as an incentive to expand activities.

3. Variable production costs (VCO) - costs that depend on production volumes and tend to change when decreasing or increasing total number manufactured goods (wages of workers, costs of resources, raw materials, electricity). This means that as the scale of activity increases, variable costs will increase. At first they will increase in proportion to the volume of production. On next stage the company will achieve cost savings when more production. And in the third period, due to the need to purchase more raw materials, variable production costs may increase. Examples of this trend are increased transportation finished products to the warehouse, payment to suppliers for additional batches of raw materials.

When making calculations, it is very important to distinguish between types of costs in order to calculate the correct cost of production. It should be remembered that variable production costs do not include real estate rental fees, depreciation of fixed assets, and equipment maintenance.

4. Average variable costs (AVC) - amount variable expenses borne by the enterprise for the production of a unit of goods. This indicator can be calculated by dividing the total variable costs for the volume of goods produced:

• SPRI = PR: O.

Average variable production costs do not change over a certain range of production volumes, but with a significant increase in the quantity of goods produced, they begin to increase. This is due to the high total costs and their heterogeneous composition.

5. Total costs (TC) - include fixed and variable production costs. They are calculated using the formula:

• OI = PI + Pri.

That is, look for the reasons for the high indicator total costs needed in its components.

6. Average total costs (ATC) - show the total production costs that fall per unit of product:

• SOI = OI: O = (PI + PrI): O.

The last two indicators increase as production volumes increase.

Types of variable expenses

Variable production costs do not always increase in proportion to the rate of increase in production volume. For example, an enterprise decided to produce more goods and for this introduced night shift. Payment for work at such times is higher, and, as a result, the company will incur additional significant costs.

Therefore, there are several types of variable costs:

• Proportional - such costs increase at the same rate as the volume of production. For example, with an increase in production by 15%, variable costs will increase by the same amount.
• Regressive - the growth rate of this type of cost lags behind the increase in product volumes; for example, with an increase in the quantity of manufactured products by 23%, variable costs will increase by only 10%.
• Progressive - variable costs of this type increase faster than the growth of production volume. For example, an enterprise increased production by 15%, and costs increased by 25%.

Costs in the short term

A short-term period is considered to be a period of time during which one group of production factors is constant and the other is variable. In this case, stable factors include the area of ​​the building, the size of the structures, and the amount of machinery and equipment used. Variable factors consist of raw materials, number of employees.

Costs in the long run

The long-run period is a period of time in which all the production factors used are variable. The fact is that over a long period, any company can change the premises to larger or smaller ones, completely update equipment, reduce or expand the number of enterprises under its control, and adjust the composition of management personnel. That is, in the long term, all costs are considered as variable production costs.

When planning a long-term business, an enterprise must conduct a deep and thorough analysis of all possible costs and draw up the dynamics of future expenses in order to achieve the most efficient production.

Average costs in the long run

An enterprise can organize small, medium and large production. When choosing the scale of activity, a company must take into account key market indicators, projected demand for its products and the cost of the required production capacity.

If the company's product is not used in great demand and it is planned to produce a small amount of it, in this case it is better to create a small production. Average costs will be significantly lower than with large-scale production. If a market assessment shows a high demand for a product, then it is more profitable for the company to organize large production. It will be more profitable and will have the lowest fixed, variable and total costs.

When choosing a more profitable production option, the company must constantly monitor all its costs in order to be able to change resources in a timely manner.

Production costs include the expenses necessary to create a product or service. For any enterprise, production costs and their types can act as payment for acquired production factors. When costs are examined from the point of view of an individual enterprise, we can talk about private costs. If costs are analyzed from the point of view of the entire society, then the need arises to take into account total costs.

Social costs are characterized by external effects of positive and negative character. Private social costs can coincide only when there are no externalities or their total effect is zero. Thus, we can say that social costs are equal to the sum of private costs and externalities.

Production costs and their types

Fixed costs include costs determined by the enterprise within one production cycle. The amount and list of fixed costs is determined by each enterprise independently; these costs will be present in all product release cycles.

Production costs and their types include variable costs that can be transferred to the finished product in full. By adding up fixed and variable costs, we get the total costs incurred by the company during each stage of production.

There is also a classification of costs into accounting and economic costs. Accounting costs include the cost of resources used by the enterprise in the actual prices of their acquisition. Accounting costs are explicit costs.

Production costs and their types include economic costs, which represent the cost of other goods that can be obtained with the most advantageous option directions of resource use. Economic costs are opportunity costs that include the sum of explicit and implicit costs. Accounting and economic costs may or may not coincide with each other.

Explicit and implicit costs

Production costs and their types imply a classification into explicit and implicit costs. Explicit costs can be determined through the amount of company expenses for paying for external resources that are not owned. These may include materials, fuel, labor and raw materials.

Implicit costs can be determined by the cost of internal resources that are owned by this enterprise. A basic example of implicit costs is presented wages, which an entrepreneur could receive if he were employed.

Explicit costs are opportunity costs that can take the form of cash payments to suppliers of production factors and intermediate goods. Explicit costs include payment for transport, rent, wages to employees, cash costs for the purchase of equipment, buildings and structures, payment for services of banks and insurance companies.

Other types of costs

Production costs and their types can be refundable or non-refundable. IN in a broad sense Sunk costs are expenses that a company cannot recover even if it ceases operations. This may include preparing advertising and obtaining a license, or the costs of registering an enterprise.

In a narrow sense, sunk costs represent the costs of those types of resources that do not have alternative use. If the equipment cannot be used alternatively, then we can say that its opportunity costs are zero.

There is also a classification of costs into fixed and variable. If we consider the short-term period, then some of the resources will remain unchanged, some will change in order to increase or decrease total output.

Fixed and variable costs

Dividing costs into fixed and variable costs only makes sense for the short term. If we consider long-term periods, then such a division will lose meaning, since all costs change, that is, they are variable.

We can say that fixed costs do not depend on how many products the company produces in the short term. This may include depreciation, interest payments on bonds, rental payments, insurance payments, and salaries of management personnel. Variable costs depend on the volume of output, and include costs for variable production factors (transport costs, communal payments, payment for raw materials, etc.).

It is impossible for companies to carry out any activity without investing costs in the process of making a profit.

However, there are costs different types. Some operations during the operation of the enterprise require constant investments.

But there are also costs that are not fixed costs, i.e. refer to variables. How do they affect the production and sale of finished products?

The concept of fixed and variable costs and their differences

The main goal of the enterprise is the manufacture and sale of manufactured products to make a profit.

To produce products or provide services, you must first purchase materials, tools, machines, hire people, etc. This requires an investment of various amounts. Money, which are called “costs” in economics.

Since monetary investments in production processes come in many different types, they are classified depending on the purpose of using the expenses.

In economics costs are shared according to the following properties:

1. Explicit is a type of direct cash costs for making payments, commission payments trading companies, payment for banking services, transportation costs, etc.;
2. Implicit, which includes the cost of using the resources of the organization's owners, not provided for by contractual obligations for explicit payment.
3. Fixed investments are investments to ensure stable costs during the production process.
4. Variables are special costs that can be easily adjusted without affecting operations depending on changes in production volumes.
5. Irrevocable – special option spending movable assets invested in production without return. These types of expenses occur at the beginning of the release of new products or reorientation of the enterprise. Once spent, funds can no longer be used to invest in other business processes.
6. Average is the estimated cost that determines the amount of capital investment per unit of output. Based on this value, it is formed piece price products.
7. Marginal is the maximum amount of costs that cannot be increased due to the ineffectiveness of further investments in production.
8. Returns are the costs of delivering products to the buyer.

Of this list of costs, the most important are their fixed and variable types. Let's take a closer look at what they consist of.

Kinds

What should be classified as fixed and variable costs? There are some principles by which they differ from each other.

In economics characterize them as follows:

• Fixed costs include the costs that need to be invested in the manufacture of products within one production cycle. For each enterprise they are individual, therefore they are taken into account by the organization independently based on an analysis of production processes. It should be noted that these costs will be characteristic and the same in each of the cycles during the manufacture of goods from the beginning to the sale of products.
• variable costs that can change in each production cycle and are almost never repeated.

Fixed and variable costs make up the total costs, summed up after the end of one production cycle.

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What applies to them

The main characteristic of fixed costs is that they do not actually change over a period of time.

In this case, for an enterprise that decides to increase or decrease its output, such costs will remain unchanged.

Among them can be attributed the following cash costs:

• communal payments;
• building maintenance costs;
• rent;
• employee earnings, etc.

In this situation, you should always understand that a constant size total costs, invested in a certain period of time to produce products in one cycle, will only be for the entire number of products produced. When calculating such costs individually, their value will decrease in direct proportion to the increase in production volumes. For all types of production this pattern is an established fact.

Variable costs depend on changes in the quantity or volume of products produced.

To them include the following expenses:

• energy costs;
• raw materials;
• piecework wages.

These monetary investments are directly related to production volumes, and therefore change depending on the planned parameters of production.

Examples

In each production cycle there are cost amounts that do not change under any circumstances. But there are also costs that depend on production factors. Depending on such characteristics, economic costs for a certain, short period of time are called constant or variable.

For long-term planning, such characteristics are not relevant, because sooner or later all costs tend to change.

Fixed costs are costs that do not depend in the short term on how much the company produces. It is worth noting that they represent the costs of its constant factors of production, independent of the number of goods produced.

Depending on the type of production into fixed costs consumables include:

Any costs that are not related to production and are the same in the short term of the production cycle can be included in fixed costs. According to this definition, it can be stated that variable costs are those expenses invested directly in product output. Their value always depends on the volume of products or services produced.

Direct investment of assets depends on the planned quantity of production.

Based on this characteristic, to variable costs The following costs include:

• raw material reserves;
• payment of remuneration for the labor of workers involved in the manufacture of products;
• delivery of raw materials and products;
• energy resources;
• tools and materials;
• other direct costs of producing products or providing services.

The graphical representation of variable costs displays a wavy line that smoothly rises upward. Moreover, with an increase in production volumes, it initially rises in proportion to the increase in the number of products produced, until it reaches point “A”.

Then cost savings occur during mass production, and therefore the line rushes upward at no less speed (section “A-B”). After the violation of the optimal expenditure of funds in variable costs after point “B”, the line again takes a more vertical position.
The growth of variable costs can be influenced by the irrational use of funds for transport needs or excessive accumulation of raw materials and volumes of finished products during a decrease in consumer demand.

Calculation procedure

Let's give an example of calculating fixed and variable costs. The production is engaged in the manufacture of shoes. The annual production volume is 2000 pairs of boots.

The enterprise has the following types of expenses per calendar year:

1. Payment for renting the premises in the amount of 25,000 rubles.
2. Interest payment 11,000 rubles. for a loan.

Production costs goods:

• for labor costs for the production of 1 pair 20 rubles.
• for raw materials and materials 12 rubles.

It is necessary to determine the size of total, fixed and variable costs, as well as how much money is spent on making 1 pair of shoes.

As we can see from the example, only rent and interest on the loan can be considered fixed or constant costs.

Due to fixed costs do not change their value when production volumes change, then they will amount to the following amount:

25000+11000=36000 rubles.

The cost of making 1 pair of shoes is considered a variable cost. For 1 pair of shoes total costs amount to the following:

20+12= 32 rubles.

Per year with the release of 2000 pairs variable costs in total are:

32x2000=64000 rubles.

Total costs are calculated as the sum of fixed and variable costs:

36000+64000=100000 rubles.

Let's define average of total costs, which the company spends on sewing one pair of boots:

100000/2000=50 rubles.

Cost analysis and planning

Each enterprise must calculate, analyze and plan costs for production activities.

Analyzing the amount of expenses, options for saving funds invested in production are considered in order to rational use. This allows the company to reduce production and, accordingly, set a cheaper price for finished products. Such actions, in turn, allow the company to successfully compete in the market and ensure constant growth.

Any enterprise should strive to save production costs and optimize all processes. The success of the development of the enterprise depends on this. Thanks to the reduction in costs, the company's income increases significantly, which makes it possible to successfully invest money in the development of production.

Costs are planned taking into account calculations of previous periods. Depending on the volume of products produced, an increase or decrease in variable costs for the manufacture of products is planned.

Display in the balance sheet

IN financial statements All information about the costs of the enterprise is entered into (Form No. 2).

Preliminary calculations during the preparation of indicators for entry can be divided into direct and indirect costs. If these values ​​are shown separately, then we can assume that indirect costs will be indicators of fixed costs, and direct costs will be variable, respectively.

It is worth considering that the balance sheet does not contain data on costs, since it reflects only assets and liabilities, and not expenses and income.

To learn what fixed and variable costs are and what applies to them, see the following video:

Costs You can call any expenditure of resources accountable. Those costs that are directly necessary for the production of a good or service are considered production costs.

The essence of costs is intuitively clear to almost everyone, but a significant part of the efforts of economic science is spent on their assessment, calculation and distribution. This happens because assessing the effectiveness of any process is a comparison of the amount of expenses incurred with the result obtained.

For economic theory cost research means their determination and classification by type, origin, items and processes. Economic practice puts specific numbers into the formulas proposed by the theory and gets the desired result.

Concept and classification of costs

The most in a simple way cost studies will be their summation. The resulting amount can be subtracted from the revenue to determine the size; you can compare the amounts of expenses for similar processes to determine more economical option etc.

For modeling economic situations, creating formulas, evaluating economic processes and their results, costs must be classified, i.e. divide according to certain characteristics and combine into typical groups. There is no rigid classification system; it is more convenient to consider costs based on the needs of a particular study. But some frequently used options can be considered a kind of rules.

Especially often costs are divided into:

• Constant - independent of the volume of production in a specific period;
• Variables - the size of which is directly tied to the amount of output.

Note that this division is valid only when considering a relatively short-term period. In the long run, all costs tend to become variable.

In relation to the main production process It is customary to allocate costs:

• For main production;
• For auxiliary operations;
• For non-production expenses, losses, etc.

If we imagine costs as economic elements, then we can distinguish from them:

• Expenses for main production (raw materials, energy, etc.);
• Labor costs;
• Social contributions from wages;
• Depreciation deductions;
• Other expenses.

A more thorough, detailed way to find out the concept, composition and types of production costs would be to compile a cost estimate for the enterprise.

According to costing items, costs are divided into:

• Purchased raw materials and supplies;
• Semi-finished products, components, production services;
• Energy;
• Labor costs for key production personnel;
• Tax deductions from wages in this category;
• from the same salary;
• Costs of preparation for production development;
• Shop costs - a category of costs for operations associated with a specific production unit;
• General production costs are expenses of a production nature that cannot be fully and accurately attributed to specific departments;
• General expenses - expenses associated with the provision and maintenance of the entire organization: management, some support services;
• Commercial (non-production) expenses - everything related to advertising, product promotion, after-sales service, maintaining the image of the enterprise and products, etc.

Another important type of cost, regardless of the analysis criteria, is average costs. This is the amount of costs per unit of output; to determine it, the volume of costs is divided by the number of units produced.

And the cost of each new unit of production when the volume of output changes is called marginal cost.

Knowing the size of average and marginal costs is necessary for making effective solutions about the optimal output volume.

Methods for calculating costs

Formulas and graphs

A general idea of ​​the cost classification system and the presence of expenses in certain areas does not give practical results when assessing specific situation. Moreover, even building models without exact numbers, requires tools to illustrate the dependencies between certain elements of the cost system and their impact on the final result. Formulas and graphic images help to do this.

By putting the appropriate values ​​into the formulas, it becomes possible to calculate a specific economic situation.

The number of costing formulas is difficult to determine precisely; each formula appears along with the situation it describes. An example of one of the most common would be the expression of total costs (calculated in the same way as total). There are several variations of this expression:

Total costs = fixed costs + variable costs;

Total costs = costs for main processes + costs for auxiliary operations + other costs;

In the same way, you can imagine the total costs determined by costing items; the only difference will be in the name and structure of the cost items. At the right approach and in calculation, applying different types of formulas to the same situation to calculate one value should give the same result.

To represent the economic situation in graphical form, you should place points corresponding to the cost values ​​on the coordinate grid. By connecting such points with a line, we get a graph of a certain type of cost.

This is how the graph can illustrate the dynamics of changes in marginal costs (MC), average total costs (ATC), average variable costs (AVC).