Fixed costs are independent. Does it make sense to divide costs into variable and fixed costs? Expenses required for the sale of products

As you know, costs are called expressed in terms of monetary form the company's expenses for the production of goods.

It is very important for any firm to have the most complete information about costs. This allows you to correctly set the price of manufactured products, calculate the level of efficiency of processes, learn about the efficiency of resource use by specific departments, etc.

Definition

In general, experts divide costs into fixed and variable e. Fixed costs do not depend on the level of output. They include the rent of premises, the cost of retraining staff, payment utilities etc.

The amount of variable costs depends on the volume of output. The main feature: when production is stopped, this type of spending disappears.

It should be noted that this division is very conditional. For example, there are also conditionally variable costs. Their value depends on the business activity of the company, but this dependence is not direct. These include, for example, long-distance calls as part of the subscription fee for telephone services.

Typically variable costs can be attributed to direct. This means that, firstly, they are directly related to the production of a product or service, and secondly, they can be included in the cost of goods based on primary documentation without any additional calculations.

You can learn more about these indicators from the following video:

Varieties

Without delving into the essence of the problem, one can decide that the growth of such costs grows with an increase in production volume, with an increase in sales of products, etc. However, this is not entirely true. Depending on the nature of the volume of output, among the variable costs are:

proportional, which increase with an increase in the volume of production (if the production of goods increases by 20%, then spending increases proportionally by 20%);
regression variables, whose growth rate is slightly behind the growth rate of production (if production increases by 20%, spending can increase by only 15%);
progressive variables, which increase somewhat faster than the increase in production and sales of goods (if production increases by 20%, spending increases by 25%).

Thus, we see that the value of variable costs is not always directly proportional to the volume of production. For example, if in the case of expanding the enterprise and increasing the volume of products, a night shift, the payout will be higher.

Direct and indirect costs among the variables are distinguished rather conditionally:

Usually to direct refers to the costs that may be associated with the production of a particular product. They relate directly to the cost of goods. It can be spending on raw materials, fuel or wages for workers.
To indirect general shop, general factory expenses, that is, those associated with the manufacture of a group of goods, can be attributed. Due to factors such as technological specificity or economic feasibility, they cannot be attributed directly to the cost. The most common example is the purchase of raw materials in complex industries.

In statistical documentation, expenses are divided into general and average. Such a division makes sense in the reporting documents of enterprises:

Medium calculated by dividing variable costs by the volume of goods produced.
General is the sum of fixed and variable costs of the organization.

You can also talk about production and non-production types. This division is directly related to the manufacturing process of products:

Production included in the cost of goods. They are tangible and inventoryable.
non-production However, they no longer depend on the volume of production, but on the duration. Therefore, it is impossible to inventory them.

Thus, we can single out the following most common examples of variable costs in production:

wage workers, depending on the volume of goods produced by them;
the cost of raw materials and other materials necessary for the manufacture of products;
expenses for warehousing, transportation and storage of goods;
interest paid to sales managers;
taxes related to production volumes: VAT, excises, etc.;
services of other organizations related to maintenance of production;
the cost of energy resources at enterprises.

How to count them?

variable costs For convenience, it can be expressed schematically as follows:

Variable costs = Raw materials + Materials + Fuel + Percentage of wages, etc.

For the convenience of calculating the dependence of costs on the volume of production, the German economist Mellerovich introduced cost response factor (K). The formula showing the relationship between cost change and productivity growth looks like this:

K = Y/X, where:

K is the cost response factor;
Y is the growth rate of costs (in percent);
X - production growth rates (goods exchange, business activity), also calculated as a percentage.

110% / 110% = 1

The progressive spending response rate will be greater than one:

150% / 100% = 1,5

Therefore, the coefficient of regressive spending is less than 1, but greater than 0:

70% / 100% = 0,7

The cost of any unit of output can be expressed by the following formula:

Y= A + bX, where:

Y denotes total costs (in any monetary unit, for example, rubles);
A is the constant part (that is, the one that does not depend on production volumes);
b - variable costs that are calculated per unit of product (expenditure response rate);
X is an indicator of the business activity of the enterprise, presented in natural units.

AVC=VC/Q, where:

AVC - average variable costs;
VC - variable costs;
Q is the volume of output.

On the graph, average variable costs are usually presented as an ascending curve.

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Fixed Costs: Accountant Details

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The production costs of an enterprise can be divided into two categories: variable and fixed costs. Variable costs depend on changes in the volume of production, while fixed costs remain fixed. Understanding the principle of classifying costs into fixed and variable is the first step to managing costs and improving production efficiency. Knowing how to calculate variable costs can help you lower your unit cost, making your business more profitable.

Steps

Calculation of variable costs

Classify costs as fixed and variable. Fixed costs are those costs that remain unchanged when the volume of production changes. For example, this can include rent and salaries of management personnel. Whether you produce 1 unit per month or 10,000 units, these costs will remain about the same. Variable costs change with changes in the volume of production. For example, they include the cost of raw materials, packaging materials, the cost of shipping products and the wages of production workers. The more products you produce, the higher the variable costs will be.

Add together all variable costs for the time period under consideration. Having identified all variable costs, calculate their total value for the analyzed period of time. For example, your production operations are quite simple and include only three types of variable costs: raw materials, packaging and shipping costs, and wages of workers. The sum of all these costs will be the total variable costs.

Divide the total variable costs by the volume of production. If you divide the total amount of variable costs by the volume of production for the analyzed period of time, you will find out the amount of variable costs per unit of output. The calculation can be presented as follows: v = V Q (\displaystyle v=(\frac (V)(Q))), where v is the variable cost per unit, V is the total variable cost, and Q is the output. For example, if in the above example the annual production is 500,000 units, then the variable cost per unit would be: 1550000 500000 (\displaystyle (\frac (1550000)(500000))), or 3 , 10 (\displaystyle 3,10) ruble.

Application of the minimax calculation method

Find the combined costs. Sometimes some costs cannot be clearly attributed to variable or fixed costs. Such costs may vary depending on the volume of production, but also be present when production is worth or there are no sales. These costs are called combined costs. They can be broken down into fixed and variable components to more accurately determine the amount of fixed and variable costs.

Estimate costs according to the level of production activity. To break down the combined costs into fixed and variable components, you can use the minimax method. This method evaluates the combined costs for the months with the highest and lowest output, and then compares them to identify the variable cost component. To start the calculation, you must first determine the months with the highest and lowest volume of manufacturing activity (production volume). Record, for each month under consideration, the production activity as some measurable indicator (for example, in terms of machine hours spent) and the corresponding amount of combined costs.
- Let's say that your company uses a waterjet cutting machine for cutting metal parts in production. For this reason, your company has variable water costs for production, which depend on its volume. However, you also have fixed water costs associated with running your business (drinking, utilities, and so on). In general, the costs of water in your company are combined.
- Let's assume that in the month with the highest production, your water bill was 9,000 rubles, and at the same time you spent 60,000 machine hours on production. And in the month with the lowest production volume, the water bill was 8,000 rubles, while 50,000 machine hours were spent.
Calculate the variable cost per unit of output (VCR). Find the difference between the two values of both indicators (costs and production) and determine the value of variable costs per unit of production. It is calculated as follows: V C R = C − c P − p (\displaystyle VCR=(\frac (C-c)(P-p))), where C and c are the costs for the months with high and low levels of production, and P and p are the corresponding levels of production activity.

Determine the total variable costs. The value calculated above can be used to determine the variable part of the combined costs. Multiply the variable cost per unit of output by the corresponding level of production activity. In this example, the calculation would be: 0 , 10 × 50000 (\displaystyle 0.10\times 50000), or 5000 (\displaystyle 5000) rubles per month with the lowest production volume, and 0 , 10 × 60000 (\displaystyle 0.10\times 60000), or 6000 (\displaystyle 6000) rubles per month with the highest production volume. This will give you the total variable cost of water in each of the months in question. Then their value can be subtracted from the total value of the combined costs and get the amount of fixed costs for water, which in both cases will be 3,000 rubles.

Using variable cost information in practice

Evaluate trends in variable costs. In most cases, an increase in production will make each additional unit produced more profitable. This is because fixed costs are spread over more units of output. For example, if a business that produced 500,000 units spent 50,000 rubles on rent, these costs in the cost of each unit of production amounted to 0.10 rubles. If the volume of production doubles, then the rental cost per unit of production will already be 0.05 rubles, which will allow you to get more profit from the sale of each unit of goods. That is, as sales revenue increases, the cost of production also increases, but at a slower pace (ideally, in the cost of a unit of production, variable costs per unit should remain unchanged, and a component of fixed costs per unit should fall).

Use the percentage of variable costs in cost to assess risk. If we calculate the percentage of variable costs in the cost of a unit of production, then we can determine the proportional ratio of variable and fixed costs. The calculation is made by dividing the value of variable costs per unit of production by the unit cost of production according to the formula: v v + f (\displaystyle (\frac (v)(v+f))), where v and f are variable and fixed costs per unit of output, respectively. For example, if the fixed costs per unit of production are 0.10 rubles, and the variable costs are 0.40 rubles (for a total cost of 0.50 rubles), then 80% of the cost is variable costs ( 0 , 40 / 0 , 50 = 0 , 8 (\displaystyle 0.40/0.50=0.8)). As an outside investor in a company, you can use this information for rate potential risk company's profitability.

Conduct benchmarking with companies in the same industry. First, calculate the variable costs per unit of output for your company. Then collect data on the value of this indicator from companies in the same industry. This will give you a starting point for evaluating the performance of your company. Higher variable costs per unit of output may indicate that a company is less efficient than others; while a lower value of this indicator can be considered a competitive advantage.

The value of variable costs per unit of output above the industry average indicates that the company spends more money and resources (labor, materials, utilities) on the production of products than its competitors. This may indicate its low efficiency or the use of too expensive resources in production. In any case, it will not be as profitable as its competitors unless it cuts its costs or increases its prices.
On the other hand, a company that is able to produce the same goods at a lower cost sells competitive advantage in getting more profit from the established market price.
This competitive advantage may be based on the use of cheaper materials, cheap labor, or more efficient manufacturing facilities.
For example, a company that purchases cotton at a lower price than other competitors can produce shirts at lower variable costs and charge lower prices for products.
Public companies publish their reports on their websites, as well as on the websites of the exchanges where they are traded. securities. Information about their variable costs can be obtained by analyzing the "Statements of Financial Performance" of these companies.

Conduct a break-even analysis. Variable costs (if known) combined with fixed costs can be used to calculate the break-even point for a new manufacturing project. The analyst is able to draw a graph of the dependence of fixed and variable costs on production volumes. With it, he will be able to determine the most profitable level of production.

Production costs are in fact the payment for the acquired factors. Their research should provide certain volumes of production in order to completely cover costs and provide an acceptable profit. Income is a dynamic drive organizational activities, costs are an important component for economic analysis. Organizations approach profits and costs differently. Income should provide maximum production opportunities for a given value of costs. Greatest Efficiency production will be at the lowest cost. They will include the cost of producing the product. For example, the purchase of raw materials, electricity, payment of working hours, depreciation, organization of production. Part of the proceeds will be used to pay off the incurred costs of production, and the rest will remain profit. This allows us to assert that the costs are less than the price of products by the amount of profit.

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

There are many ways for an enterprise to make a profit and translate it into cash. For each method, the leading factors will be costs - the real costs incurred by the organization during production activities to get a positive income. If management ignores spending, then financial and economic activity becomes unpredictable. Profit in such an enterprise begins to decrease, and eventually becomes negative, which means a loss.

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

To analyze the costs should begin with the classification. It will provide a comprehensive understanding of the main characteristics and properties of costs. Costs are a complex phenomenon and it is impossible to represent them with the help of one classification. Generally speaking, each enterprise can be considered trading, manufacturing or servicing. The information presented applies to all enterprises, but to a greater extent - production, as they have a more complex cost structure.

The main differences in general classification there will be a place for the appearance of costs, their relation to areas of activity. The above classification is used to systematize expenses in profit reports, for comparative analysis required types of costs.

Primary types of expenses:

Production

production invoices;
direct materials;
direct labor.

non-production

selling expenses;
administrative expenses.

Direct costs are always variable. But in general production, commercial and general business costs, constant and variable costs coexist. A simple example: paying for mobile phone. The constant component will be subscription fee, and the variable is determined by the volume of spoken time and the presence of long-distance calls. When accounting for costs, it is necessary to clearly understand the classification of costs and correctly separate them.

According to the classification used, there are non-production and production costs. Production costs include: payment of direct labor, use of direct materials, production overheads. Spending on direct materials consists of the costs that the company had when purchasing raw materials and components, in other words, what is directly related to production and transferred to finished products.

Direct labor costs are the wages production staff and efforts associated with the manufacture of goods. The payment of shop foremen, managers and equipment adjusters is a production overhead. It is necessary to take into account the accepted conditionality when determining in modern production, where "true direct" labor is rapidly declining in highly automated production. In some enterprises, production is fully automated, which does not require direct labor. But the designation "basic production workers" is retained, the payment is considered to be the cost of direct labor of the enterprise.

Production overheads include the remaining costs of providing production. In practice, the structure is polysyllabic, the volumes are scattered over a wide range. Typical manufacturing overheads include indirect materials, electricity, indirect labor, equipment maintenance, thermal energy, renovation of premises, part of the tax payments that are included in the gross costs and other things that are immanently associated with the release of products in the company.

Non-manufacturing costs are divided into implementation costs and administrative costs. The cost of selling a product consists of expenses that were directed to the safety of products, promotion on the market and delivery. Administrative costs are the totality of all expenses for the management of the company - the maintenance of the management apparatus: the planning and financial department, accounting.

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

cost sharing method;
conditional classification of costs;
the impact of production volume on cost behavior.

Systematization is important for planning and analyzing production. Fixed costs remain relatively constant in magnitude. With an increase in production, they turn out to be an important component of cost reduction, with an increase in volume, their share in a unit of finished goods decreases.

variable costs

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

progressive;
degressive;
proportional.

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

productivity growth;
reducing the number of workers;
decrease in stocks of materials, finished products during a difficult economic period.

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

Fixed costs are costs that are not 100% determined by production. Fixed costs per unit of output will decrease when the volume of production is multiplied, and vice versa, increase when the volume decreases.

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

The high level of fixed costs is determined labor characteristics, which depend on mechanization and automation, capital intensity of production. Fixed costs are less prone to sudden changes. In the presence of objective constraints, there are big potential reduction of fixed costs: sale of unnecessary assets. Reduction of administrative and management expenses, reduction of utility bills due to energy savings, registration of equipment for rent or leasing.

mixed costs

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

method of experimental estimates;
engineering or analytical method;
graphical method: the dependence of the volume on the cost of goods is established (supplemented with an analytical calculation);
economic and mathematical methods: least squares method; correlation method, the method of the lowest and highest point.

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

It is impossible to use a single classification of the division of costs into variables or constants for all industries. The nomenclature of fixed costs cannot be the same for different industries. It should take into account the specifics of production, the enterprise and the procedure for attributing costs to prime cost. The classification is created individually for each area, technology or production organization.

The standards allow differentiating costs by changing the volume of production.

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

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

When constructing, the following conventions are used:

the price of raw materials is taken as a constant value for the considered planning period;
fixed costs remain unchanged in a certain sales range;
variable costs remain constant per unit of goods when the volume of sales changes;
uniformity of sales is accepted.

The horizontal axis indicates production volumes as a percentage of the used capacity or per unit of goods produced. The verticals indicate income, production costs. All costs on the chart are usually divided into variable (PI) and fixed (POI). Additionally, gross costs (VI), sales proceeds (VR) are applied.

The intersection of revenue and gross costs forms the break-even point (K). In this place, the company will not make a profit, but also does not incur losses. The volume at the break-even point is called critical. If the real value is less than the critical value, then the organization works in the "minus". If production volumes are greater than the critical value, then profit is formed.

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

VR \u003d P + PI + POI,

AT break-even point P=0, respectively, the expression takes a simplified form:

BP = PI + POI

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

Ts * Vkr \u003d POI + Vkr * SPI

where SPI- variable costs per unit of output;
C- the cost of a unit of goods;
Tue- critical volume.

Vcr \u003d POI / (C-SPI)

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

Cost and Cost Reduction Factors

Analysis of the actual cost of production, determination of reserves, economic effect from the decrease is based on calculations of economic factors. The latter allow you to cover most of the processes: labor, its objects, means. They characterize the main areas of work to reduce the cost of goods: productivity growth, efficient use of equipment, the introduction of new technologies, the modernization of production, the reduction in the cost of blanks, the reduction of the administrative apparatus, the reduction of marriage, non-production losses, and expenses.

Savings on cost reduction is determined by the following factors:

The growth of the technical level. This happens with the introduction of more advanced technologies, automation and mechanization of production, best use raw materials and new materials, revision of technological characteristics and product design.
Modernization of labor organization and productivity. Cost reduction occurs when changing production organization, methods and forms of labor, which is facilitated by specialization. Improve management while minimizing costs. Reconsider the use of fixed assets, improve logistics and minimize transportation costs.
Reduction of semi-fixed costs by means of changing the structure and volume of production. This reduces depreciation, changes the range, quality of goods. The volume of output does not directly affect the semi-fixed costs. With an increase in volumes, the share of semi-fixed costs per unit of goods will decrease, and, accordingly, the cost will also decrease.
Need better use Natural resources. It is necessary to take into account the composition and quality of the source material, changes in the methods of extraction and finding deposits. This is an important factor that shows the influence natural conditions for variable costs. The analysis should be based on sectoral methods of the extractive industry.
Industry factors, etc. This group includes the development of new shops, production and production units, as well as preparation for them. Reserves for cost reduction are periodically reviewed in case of liquidation of old and commissioning of new industries, which will improve economic factors.

Reducing fixed costs:

reduction of administrative and commercial expenses;
reduction commercial services;
load increase;
sale of unused intangible and current assets.

Variable Cost Reduction:

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

The listed methods lead to the following conclusion: cost reduction should mainly occur due to minimization of preparatory processes, development of a new range of technologies.

Changes in the range of products produced become an important factor determining the level production costs. With excellent profitability, a shift in the assortment should be associated with improving the structure and increasing production efficiency. This can either increase or decrease production costs.

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

Cost classification.

Great value for proper organization cost accounting has a science-based classification of costs. Production costs are grouped according to their place of origin, responsibility centers, cost carriers and types of expenses.

At the place of origin, the costs are grouped by production, workshops, sections and other structural divisions of the enterprise. This grouping of costs is necessary for:

performance monitoring structural divisions and the enterprise as a whole;
distribution of overhead costs between certain types products when calculating the cost of products (works, services).

By responsibility centers (segments of the enterprise), costs are distributed to accumulate data on costs and control deviations from the estimate. Cost center - an organizational unit or area of activity where it is advisable to accumulate information about the costs of acquiring assets and expenses.

Cost carriers are the types of products (works, services) of the enterprise intended for sale. This grouping is necessary to determine the unit cost of production (works, services).

By type, costs are grouped by economically homogeneous elements and by calculation items in accordance with the Regulations on the composition of costs for the production and sale of products (works, services) included in the cost of products (works, services).

For the purposes of management accounting, costs are divided into categories depending on what management task needs to be solved.

Classification of costs depending on the objectives of management accounting

Tasks	Cost classification
Calculation of the cost of manufactured products, valuation of inventories and profits	Incoming and expired Direct and indirect Basic and overhead Included in the cost (production) and costs of the reporting period (periodic) Single element and complex Current and one-time
Management decision making and planning	Constants and variables Accepted and not taken into account in assessments Irretrievable and returnable Imputed (lost profits) Marginal and incremental Planned and unplanned
Control and regulation	Regulated and non-regulated

Fixed and variable costs.

They are used in the analysis of break-even and related indicators, as well as in the optimization of products.

In relation to the volume of production or sales (level of business activity), costs are divided into "fixed" and "variables".

Variable costs change in proportion to the volume of production or sales, and those calculated per unit of output are a constant value. An example of cost variables for commercial enterprise is the cost of purchased goods, commissions and other costs associated with sales, which change in proportion to changes in sales volume.

Dynamics of total (a) and specific (b) variable costs.
Sper - total variable costs, rub. Uper - specific variable costs, rub.

fixed costs in total do not change with a change in the level of business activity, but calculated per unit decrease with an increase in production or sales. Examples of fixed costs are the cost of renting premises, salaries of administrative staff, professional services. The total amount of these costs is relatively independent of the volume of sales.

Dividing costs into variable and fixed, you need to use the concept " area of relevance", in which a special relationship is maintained between the planned relationship of revenue and costs. So fixed costs are constant with respect to a specific period, for example, one year, but over time due to the impact external factors may increase or decrease (change in the property tax rate, etc.).

Dynamics of total (a) and specific (b) fixed costs.
Spost - total fixed costs, rub. Upost - fixed costs per unit of output (specific), rub.

Some types of costs cannot be strictly defined in relation to the volume of production as variables or variables. Therefore, in management accounting, an additional group of conditionally variable or conditionally fixed costs is distinguished. These costs have both fixed and variable components. For example, the cost of maintaining a warehouse:

Fixed component - warehouse rental and utilities
Variable component - warehouse processing services (operations for the movement of commodity items)

When classifying costs, variable and fixed components are separated into independent cost items, so conditionally variable or conditionally fixed costs are not allocated to a separate group.

Costs accepted and not taken into account in the assessment.

Acceptance process management decision involves comparing several alternatives with each other in order to choose the best one. The indicators compared in this case can be divided into two groups: the first remain unchanged for all alternative options, the second vary depending on the decision made. It is advisable to compare only the indicators of the second group. These costs, which distinguish one alternative from another, are called relevant. Only they are taken into account when making decisions.

Example. A company that sells products foreign market, basic materials were purchased for the future in the amount of 500 rubles. Subsequently, in connection with the change in technology, it turned out that for own production these materials are unsuitable. The products made from them will be uncompetitive in the foreign market. However, the Russian partner is ready to buy products made from these materials from this enterprise for 800 rubles. At the same time, the additional costs of the enterprise for the manufacture of products will amount to 600 rubles. Is it reasonable to accept such an order?

Expired costs for the purchase of materials in the amount of 500 rubles. have already taken place. They do not affect the choice of solution, are not relevant. Let's compare the alternatives by relevant indicators (table).

Choosing alternative 2, the enterprise will reduce its loss from the purchase of materials it does not need by 200 rubles, reducing it from 500 to 300 rubles.

Approaches to cost reduction analysis.

Cost structure analysis

Building a cost management system.

Cost classification.
Methodology for allocating costs by departments, types of activities and types of products:
- bases and principles of cost allocation;
- formats of primary reporting forms on costs;
- methodology for filling out primary reporting forms;
- methodology for processing primary reporting forms, which allows distributing costs between types of products, objects of accounting and types of activities;
- management cost reporting formats.
Choice of costing method.
Consider cost reduction opportunities.
Conduct cost-benefit analysis.

Costing method for variable costs ("direct-costing").

Its essence lies in a fundamentally new approach to the inclusion of costs in the cost. Costs are divided into fixed and variable. Only variable costs are included in the cost price. To determine it, the amount of variable costs is divided by the number of products produced and services provided. Fixed costs are generally not included in the cost calculation, but as expenses of a given period, they are written off from the profit received during the period in which they were made. In other words, before calculating the operating profit, an indicator of the marginal profit of the company is formed, and only then, by reducing the marginal profit of the company by the amount of fixed costs, is formed financial results.

There are many opinions about the legitimacy of such an incomplete inclusion of costs in the cost. International Standards accounting prohibit the use of this approach to compile financial reporting companies in financial accounting. The main argument against this is the thesis that fixed costs are also involved in the process of creating products. But on the other hand, it turns out that fixed costs are involved in different ways in creating the cost of different volumes of the same product, and it is almost impossible to calculate the actual participation of fixed costs in creating costs, so their cost is simply written off from the profit received by the company.

Below is a brief summary of the "direct-costing" and "absorption-costing" costing methods.

"Direct-costing"	"absorption-costing"
Based on specific production costs. Fixed costs are included in the entire amount of the financial result and are not posted by type of product.	It is based on the distribution of all costs included in the cost price by type of product (calculation of the total cost of production).
Assumes the breakdown of costs into fixed and variable.	Assumes a breakdown of costs into direct and indirect.
It is used for more flexible pricing, as a result of which the competitiveness of products increases. Provides the ability to determine the profit generated by the sale of each additional unit of production, and, accordingly, the ability to plan prices and discounts for a certain volume of sales.	Most commonly used in Russian enterprises. Mainly used for external reporting.
Inventories of finished goods are valued at direct costs only.	Inventory in stock is valued at full cost, including fixed manufacturing cost components.

Marginal profit is the excess of sales revenue over all variable costs associated with a given sales volume.

Therefore, the contribution margin method is based on the following formula:

Marginal profit \u003d Revenue from sales of products - Variable costs for the same volume of production

If we subtract fixed costs from marginal profit, we get the operating profit:

Operating Profit = Marginal Profit - Fixed Costs

Example. The difference in the impact of methods of accounting for full and variable costs on the cost of goods sold. Let the direct material cost per product be $59,136, direct labor cost $76,384, variable overhead cost $44,352, and fixed overhead cost $36,960. During the year, 24,640 units of products were produced. There was no work in progress either at the beginning or at the end of the reporting period. Unit selling price is $24.50, variable business expenses per unit - $4.80. Fixed selling expenses for the period are $48,210 and fixed administrative expenses are $82,430.

	Variable Cost Accounting	Full Cost Accounting
unit cost
Direct material costs ($59,136:24,640 units)	$2,40	$2.40
Direct labor costs ($76,384:24,640 units)	3.10	3.10
Variable overhead costs ($44,352:24,640 units)	1.80	1.80
Fixed overhead costs ($36,960:24,640 units)	-	1.50
Total unit cost	$7,30	$8.80
Finished goods balance at the end of the year (2,640 x $7.30) (2,640 x $8.80)	19,272	23,232
Cost of goods sold (22,000 x $7.30) (22,000 x $8.80)	160,600	193,600
	36,960	-
Total costs shown in the income statement	$197,560	$193,600
Total costs to be accounted for	$216,832	$ 216,832

Profit and loss statement (Margin approach).

Revenues from sales $539,000

Variable part of the cost of goods sold

$179,872

Minus Final residues of finished products $19,272

Variable part of the cost of goods sold $160,600

Plus Variable selling expenses (22,000 x $4.80) $105,600 $266,200

Marginal profit $272,80 0

minus fixed costs

$36,960

Fixed selling expenses $48,210

permanent administrators. expenses $82,430 $167,600

Operating profit (before tax) $105,200

Example. Unit price - 10 thousand rubles, variable costs per unit - 6 thousand rubles, fixed overhead costs amounted to 300 thousand rubles. for the period, fixed general business costs amounted to 100 thousand rubles. for the period.

	Period 1	Period 2	Period 3	Period 4	Period 5	Period 6
Sales volume (pcs)	150	120	180	150	140	160
Production volume (pcs.)	150	150	150	150	170	140

Method of costing at full cost.

	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)
	Period 1	Period 2	Period 3	Period 4	Period 5	Period 6

Prod. expenses

Cost of goods sold
Volume of sales
Gross profit
General business. expenses
Operating profit

Cost calculation method "direct costing".

	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)	(thousand roubles.)
	Period 1	Period 2	Period 3	Period 4	Period 5	Period 6
Stocks of finished goods in stock at the beginning of the period
Prod. AC expenses
Inventory of finished goods in stock at the end of the period
Cost of goods sold at variable costs
Fixed overhead costs
Total productions. expenses
Volume of sales
Gross profit
General business. expenses
Operating profit

Operating lever.