Fixed costs in the enterprise. Variable costs of the enterprise

The expenses of any enterprise include so-called forced costs. They are associated with the acquisition or use different means production.

Cost classification

All costs of an enterprise are divided into variable and fixed. The latter includes payments that do not affect the volume of products produced. Accordingly, we can say which expenses are not considered variable. Among them, in particular, are the costs of renting premises, management costs, payment for risk insurance services, payment of interest for the use of credit funds, etc.

What expenses are classified as variable costs? This category of costs includes payments that directly affect production volume. TO variable expenses include the costs of raw materials and supplies, staff salaries, purchase of packaging, logistics, etc.

Fixed costs always exist throughout the entire operation of the enterprise. Variable costs, in turn, are absent when the production process is stopped.

This classification is used to determine the company's development strategy over a certain period.

In the long run, all types of costs can be classified as variable costs. This is due to the fact that they all influence output to a certain extent. finished products and making a profit from the production process.

Cost value

Over a relatively short period, the enterprise will not be able to radically change the method of production of goods, capacity parameters, or begin the production of alternative products. However, variable cost indices can be adjusted during this time. This, in fact, is the essence of cost analysis. The manager, by adjusting individual parameters, changes the production volume.

It is impossible to significantly increase the quantity of output by adjusting this index. The fact is that at a certain stage, an increase in only those costs that relate to variable costs will not lead to a significant jump in growth rates - part of the fixed costs also needs to be adjusted. In this case, you can rent additional production space, launch another line, etc.

Types of variable costs

All costs that relate to variable expenses are divided into several groups:

Specific. This category includes costs that arise after the creation and sale of one unit of goods.
Conditional. Conditionally variable costs include all costs that are directly proportional to the current quantity of products produced.
Average variables. This group includes average values of specific costs taken over a certain period of time of operation of the enterprise.
Direct variables. This type of cost is related to the production of products of a particular type.
Limit variables. These include the costs incurred by the enterprise when producing each additional unit of goods.

Material costs

Variable costs include costs included in the cost of the final (finished) product. They reflect the cost:

Raw materials/materials obtained from third party suppliers. These materials or raw materials must be used directly in the production of the product or be part of the components necessary to create it.
Work/services provided by other business entities. For example, the enterprise used a control system supplied by a third party, the services of a repair team, etc.

Sales costs

Variables include logistics costs. We are talking, in particular, about transport costs, costs of accounting, movement, write-off of valuables, costs of delivering finished products to warehouses of trading enterprises, to retail points, etc.

Depreciation deductions

As you know, any equipment used in the production process wears out over time. Accordingly, its effectiveness decreases. To avoid negative influence moral or physical wear and tear equipment for the production process, the enterprise transfers a certain amount to a special account. At the end of its service life, these funds can be used to modernize obsolete equipment or purchase new ones.

Deductions are made in accordance with depreciation rates. The calculation is made based on the book value of fixed assets.

The amount of depreciation is included in the cost of finished products.

Remuneration of personnel

Variable expenses include not only the direct earnings of the company’s employees. They also include all mandatory deductions and contributions, established by law(amounts to the Pension Fund, Compulsory Medical Insurance Fund, personal income tax).

Calculation

To determine the amount of costs, a simple summation method is used. It is necessary to add up all the costs incurred by the enterprise over a certain period of time. For example, the company spent:

35 thousand rubles. for materials and raw materials for production.
20 thousand rubles. - for the purchase of packaging and logistics.
100 thousand rubles. - to pay salaries to employees.

Adding up the indicators, we find the total amount of variable costs - 155 thousand rubles. Based on this value and production volume, their specific share in the cost can be found.

Let's say the company produced 500 thousand products. Specific costs will be:

What are fixed and variable costs

rub. / 500 thousand units = 0.31 rub.

If the enterprise produced 100 thousand more goods, then the share of expenses will decrease:

155 thousand rubles. / 600 thousand units = 0.26 rub.

Break even

This is a very important indicator for planning. It represents the state of the enterprise in which production is carried out without loss for the company. This state is ensured by the balance of variable and fixed costs.

The break-even point must be determined at the planning stage of the production process. This is necessary so that the management of the enterprise knows what minimum quantity of products needs to be produced in order for all costs to be recouped.

Let's take the data from the previous example with some minor additions. Let's say the fixed costs are 40 thousand rubles, and the estimated cost of a unit of goods is 1.5 rubles.

The amount of all costs will be - 40 + 155 = 195 thousand rubles.

The break-even point is calculated as follows:

195 thousand rubles. / (1.5 - 0.31) = 163,870.

This is exactly how many units of product the enterprise must produce and sell to cover all costs, i.e., to break even.

Variable expense rate

It is determined by indicators of estimated profit when adjusting the amount of production costs. For example, when new equipment is put into operation, the need for the same number of employees will no longer be required. Accordingly, the volume of the wage fund may be reduced due to a decrease in their number.

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Fixed costs FC (English fixed costs) are costs that do not depend on production volume.

Fixed costs- These are costs that do not change with changes in production volume. They are associated with fixed costs in each period of time, i.e. depend not on production volume but on time. Examples of fixed costs:

· Rent.

· Property taxes and similar payments.

· Salaries of management personnel, security, etc.

The schedule is straight.

Variable costs, their essence and graphic expression.

Variable costs VC (English variable costs) are costs that depend on production volume. Direct costs of raw materials, materials, labor, etc. vary depending on the scale of activity.

The graph is a linear slope.

Average gross, average variable and average fixed costs, dynamics of their changes (show graphically).

Under average refers to the firm's costs of producing and selling a unit of goods. Highlight:

· average fixed costs AFC (English average fixed costs), which are calculated by dividing the firm's fixed costs by production volume;

average variable costs AVC

What costs are variable and constant examples?

average variable costs), calculated by division variable costs on production volume;

· average gross costs or the total cost per unit of an ATC product (average total costs), which are defined as the sum of average variable and average fixed costs or as the quotient of gross costs divided by output volume.

Rice. 10.4. Family of company cost curves in the short term: C - costs; Q - output volume; AFC - average fixed costs; AVC - average variable costs; ATC - average gross costs; MC - marginal cost

Marginal costs, formulas for their expression and graphical display.

The increase in costs associated with the release of an additional unit of production, i.e. The ratio of the increase in variable costs to the increase in production caused by them is called the marginal costs of the company MC (marginal costs):

where sVC is the increase in variable costs; sQ is the increase in production volume caused by them.

If, with an increase in sales volume by 1OO units. of goods, the firm's costs will increase by 800 rubles, then the marginal costs will be 800: 100 = 8 rubles. This means that an additional unit of goods costs the company an additional 8 rubles.

As production and sales volume increases, the firm's costs may change:

a) evenly. In this case, marginal costs are a constant value and are equal to variable costs per unit of goods (Fig. 10.3, A);

b) with acceleration. In this case, marginal cost increases as production volume increases. This situation is explained either by the action of the law of diminishing returns, or by the rise in prices of raw materials, materials and other factors, the costs of which are classified as variables (Fig. 10.3, b);

c) with slowdown. If the company's expenses for purchased raw materials, materials, etc. decrease as output increases, marginal costs decrease (Fig. 10.3, V).

Rice. 10.3. Dependence of changes in firm costs on production volume

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Variable Cost Examples

Conditionally fixed and conditionally variable costs

In general, all types of costs can be divided into two main categories: fixed (conditionally fixed) and variable (conditionally variable). According to the legislation of the Russian Federation, the concept of fixed and variable costs is present in paragraph 1 of Article 318 of the Tax Code of the Russian Federation.

Conditionally fixed costs(English)

Types of production costs

total fixed costs) - an element of the break-even point model, representing costs that do not depend on the volume of output, contrasted with variable costs, which add up to total costs.

In simple terms, these are expenses that remain relatively unchanged during the budget period, regardless of changes in sales volumes. Examples are: administrative expenses, expenses for rent and maintenance of buildings, depreciation of fixed assets, expenses for their repairs, time wages, on-farm deductions, etc. In reality, these expenses are not constant in the literal sense of the word. They increase with increasing scale economic activity(for example, with the advent of new products, businesses, branches) at a slower pace than the growth of sales volumes, or grow spasmodically. That's why they are called conditionally constant.

This type of cost largely overlaps with overhead, or indirect costs that accompany the main production, but are not directly related to it.

Detailed examples of semi-fixed costs:

Interest for obligations during the normal operation of the enterprise and maintaining the volume of borrowed funds, a certain amount must be paid for their use, regardless of the volume of production, however, if the volume of production is so low that the enterprise is preparing for bankruptcy , these costs can be neglected and interest payments can be stopped
Enterprise property taxes , since its value is quite stable, are also mainly fixed expenses, however, you can sell property to another company and rent it from it (form leasing ), thereby reducing property tax payments
Depreciation deductions using the linear method of accrual (evenly for the entire period of use of the property) according to the chosen accounting policy, which, however, can be changed
Payment security, watchmen , despite the fact that it can be reduced by reducing the number of workers and reducing the load on checkpoints , remains even if the enterprise is idle, if it wants to preserve its property
Payment rental depending on the type of production, duration of the contract and the possibility of concluding a sublease agreement, it can act as a variable cost
Salary management personnel under conditions of normal functioning of the enterprise is independent of production volumes, however, with the accompanying restructuring of the enterprise layoffs ineffective managers can also be reduced.

Variable (conditionally variable) costs(English) variable costs) are expenses that change in direct proportion in accordance with the increase or decrease in total turnover (sales revenue). These costs are associated with a business's operations to purchase and deliver products to consumers. This includes: the cost of purchased goods, raw materials, components, some processing costs (for example, electricity), transportation costs, piecework wage, interest on loans and borrowings, etc. They are called conditional variables because a directly proportional dependence on sales volume actually exists only during a certain period. The share of these costs may change over a certain period (suppliers will raise prices, the rate of inflation of selling prices may not coincide with the rate of inflation of these costs, etc.).

The main sign by which you can determine whether costs are variable is their disappearance when production stops.

Variable Cost Examples

In accordance with IFRS standards, there are two groups of variable costs: production variable direct costs and production variable indirect costs.

Manufacturing variable direct costs- these are expenses that can be attributed directly to the cost of specific products based on primary accounting data.

Manufacturing Variable Indirect Costs- these are expenses that are directly dependent or almost directly dependent on changes in the volume of activity, but due to technological features their production cannot or is not economically feasible to directly attribute to manufactured products.

Examples direct variables costs are:

Costs of raw materials and basic materials;
Energy costs, fuel;
Wages of workers producing products, with accruals for it.

Examples indirect variables costs are the costs of raw materials in complex production. For example, when processing raw materials - coal - coke, gas, benzene, coal tar, and ammonia are produced. When milk is separated, skim milk and cream are obtained. It is possible to divide the costs of raw materials by type of product in these examples only indirectly.

Break even (BEP — break-even point) - the minimum volume of production and sales of products at which costs will be offset by income, and with the production and sale of each subsequent unit of product the enterprise begins to make a profit. The break-even point can be determined in units of production, in monetary terms, or taking into account the expected profit margin.

Break-even point in monetary terms- such a minimum amount of income at which all costs are fully recouped (profit is equal to zero).

B EP =* Revenue from sales

Or, which is the same thing BEP = = *P (see below for explanation of meanings)

Revenue and costs must relate to the same period of time (month, quarter, six months, year). The break-even point will characterize the minimum acceptable sales volume for the same period.

Let's look at the example of a company. Cost analysis will help you clearly determine BEP:

Break-even sales volume - 800/(2600-1560)*2600 = 2000 rubles. per month. Actual sales volume is 2600 rubles/month. exceeds the break-even point, this is a good result for this company.

The break-even point is almost the only indicator about which we can say: “The lower, the better. The less you need to sell to start making a profit, the less likely it is to go bankrupt.

Break-even point in units of production- such a minimum quantity of products at which the income from the sale of these products completely covers all the costs of its production.

Those. it is important to know not only the minimum allowable revenue from sales as a whole, but also the necessary contribution that each product should bring to the overall profit - that is, the minimum required amount sales of each type of product. To do this, calculate the break-even point in in kind:

VER =or VER = =

The formula works flawlessly if the enterprise produces only one type of product. In reality, such enterprises are rare. For companies with a large range of production, the problem arises of allocating the total amount of fixed costs to individual species products.

Fig.1. Classic CVP analysis of the behavior of costs, profits and sales volume

Additionally:

BEP (break-even point) - break even,

TFC (total fixed costs) - the value of fixed costs,

V.C.(unit variable cost) - the value of variable costs per unit of production,

P (unit sale price) - cost of a unit of production (sales),

C(unit contribution margin) - profit per unit of production without taking into account the share of fixed costs (the difference between the cost of production (P) and variable costs per unit of production (VC)).

C.V.P.-analysis (from the English costs, volume, profit - expenses, volume, profit) - analysis according to the “costs-volume-profit” scheme, an element of managing the financial result through the break-even point.

Overhead- costs of conducting business activities that cannot be directly correlated with the production of a specific product and therefore are distributed in a certain way among the costs of all produced goods

Indirect costs- costs that, unlike direct ones, cannot be directly attributed to the manufacture of products. These include, for example, administrative and management costs, costs for staff development, costs in production infrastructure, costs in social sphere; they are distributed among various products in proportion to a justified base: the wages of production workers, the cost of materials consumed, the volume of work performed.

Depreciation deductions- an objective economic process of transferring the value of fixed assets as they wear out to the product or services produced with their help.

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Solution. 1. Determine the share of semi-fixed costs in the cost of production:

1. Determine the share of semi-fixed costs in the cost of production:

2. Planned production costs will be:

3. The amount of cost reduction in the planning period due to an increase in production volume:

Costs per unit of production decreased from 2 million rubles. (40000: 2000) up to 1.82 million rubles. (4.36: 2 1.2), i.e. almost 200 thousand rubles.

Cost structure in production and the factors that determine it

Under cost structure its composition by elements or items and their share in the total cost are understood. It is in motion and is influenced by the following factors:

1) specifics (features) of the enterprise. Based on this, they distinguish: labor-intensive enterprises (a large share of wages in the cost of production); material-intensive (large share material costs); capital-intensive (large share of depreciation); energy-intensive (large share of fuel and energy in the cost structure);

2) acceleration of scientific and technological progress. This factor influences the cost structure in many ways. But the main influence is that under the influence of this factor the share of living labor decreases, and the share of materialized labor in the cost of production increases;

3) level of concentration, specialization, cooperation, combination and diversification of production;

4) geographical location of the enterprise;

5) inflation and change interest rate bank loan.

The structure of product costs is characterized by the following indicators:

The relationship between living and materialized labor;

The share of an individual element or item in total costs;

The relationship between fixed and variable costs, between fixed and overhead costs, between production and commercial (non-production) costs, between direct and indirect, etc.

Systematic determination and analysis of the cost structure of an enterprise are very important, primarily for managing costs in an enterprise in order to minimize them.

The cost structure makes it possible to identify the main reserves for their reduction and develop specific measures for their implementation at the enterprise.

Behind last years(1990-2004), the cost structure in general for industry and its branches has changed significantly, as evidenced by the data presented in Table 2.

Analysis of the data in this table allows us to conclude that the structure of production costs in the industry as a whole during the analyzed period has changed significantly: the share of depreciation decreased from 12.1 to 6.8%; other expenses increased from 4.1 to 18.1%; the share of material costs decreased from 68.6 to 56.3%; contributions for social needs increased from 2.2 to 5.1%; The cost structures for production of products in individual industries differ quite significantly.

The cost structure for the analyzed period was influenced by the following factors:

Inflationary process.

QUESTION 2: What are the main differences between the concepts of “costs” and “expenses”?

Cost of material resources, fixed assets, work force changed inadequately in relation to each other, this was reflected in the cost structure;

The process of disposal of fixed assets is ahead of the process of their input, which led to a decrease in the share of depreciation. The fact that the repeated revaluation of fixed assets did not correspond to the level of inflation also had an impact;

The cost structure at each enterprise should also be analyzed both element-by-element and item-by-item. This is necessary, as already noted, to manage costs in the enterprise.

Planning of production costs at the enterprise

The production cost plan is one of the most important sections of the economic and social development enterprises. Planning the cost of production at an enterprise is very important, as it allows you to know what costs the enterprise will require for the production and sale of products, what financial results can be expected in the planning period. The product cost plan includes the following sections:

1. Cost estimate for production (compiled by economic elements).

2. The cost of all goods and products sold.

3. Planned costing of individual products.

4. Calculation of the reduction in the cost of commercial products based on technical and economic factors.

The most important qualitative indicators of the plan for the cost of production are: the cost of commercial and sold products; unit cost of the most important types of products; costs per 1 rub. commercial products; percentage of cost reduction by technical and economic factors; percentage reduction in the cost of compared products.

Production cost estimate is compiled without intra-plant turnover based on calculations for each element and is the main document for the development financial plan. It is compiled for the year with the distribution of the entire amount of expenses by quarter.

Costs of raw materials, basic and auxiliary materials, fuel and energy in the cost estimate are determined primarily by production program based on the planned volume, norms and prices.

The total amount of depreciation charges is calculated on the basis of current standards for groups of fixed assets. Based on the cost estimate, the costs for the entire gross and commercial output are determined. Production costs gross output are determined from the expression

Cost of products sold represents the full cost of commodity output minus the increase plus the decrease in the cost of the balances of unsold products in the planning period.

Calculation unit cost called calculation. Calculations can be estimated, planned, or normative.

Estimate calculation compiled for products or orders that are carried out on a one-time basis.

Planned costing(annual, quarterly, monthly) is compiled for mastered products provided for by the production program.

Standard calculation reflects the level of product costs calculated according to cost standards in force at the time of its preparation. It is compiled in those industries where there is a standard accounting of production costs.

Methods for planning production costs. In practice, two methods of product cost planning are most widely used: standard and planning based on technical and economic factors. As a rule, they are used in close interrelation.

The essence of the normative method is that when planning the cost of production, norms and standards for the use of material, labor and financial resources, i.e. normative base enterprises.

The method of planning the cost of production based on technical and economic factors is more preferable than the standard method, since it allows us to take into account many factors that will most significantly influence the cost of production in the planning period. This method takes into account the following factors: 1) technical, i.e. introduction of new equipment and technology at the enterprise during the planning period; 2) organizational. These factors mean the improvement of the organization of production and labor at the enterprise in the planning period (deepening specialization and cooperation, improving the organizational structure of enterprise management, introducing a brigade form of labor organization, NOT, etc.); 3) changes in the volume, nomenclature and range of products; 4) the level of inflation in the planning period; 5) specific factors that depend on the characteristics of production. For example, for mining enterprises - changes in mining and geological conditions for the development of mineral resources; for sugar factories - change in sugar content in sugar beets.

All these factors ultimately affect the volume of output, labor productivity (output), changes in standards and prices for material resources.

To determine the amount of change in the cost of production in the planning period due to the influence of the above factors, the following formulas can be used:

a) change in the value of production costs from changes in labor productivity (DCpt):

b) change in the value of the cost of production from a change in production volume

c) changes in the value of production costs due to changes in norms and prices for material resources

We will show the methodology for planning product costs based on technical and economic factors using a conditional example.

Example. During the reporting year, the volume of marketable products at the enterprise amounted to 15 billion rubles, its cost was 12 billion rubles, including wages with deductions

for social needs - 4.8 billion rubles, material resources - 6.0 billion rubles. Conditionally fixed costs in the cost of production amounted to 50%. In the planning period, through the implementation of a plan of organizational and technical measures, it is planned to increase the volume of marketable products by 15%, increase labor productivity by 10%, and average wages by 8%. The consumption rates of material resources will decrease by 5% on average, and their prices will increase by 6%.

Determine the planned cost of marketable products and planned costs per 1 ruble. commercial products.

Let's consider the variable costs of an enterprise, what they include, how they are calculated and determined in practice, consider methods for analyzing the variable costs of an enterprise, the effect of changing variable costs at different volumes of production and their economic sense. In order to easily understand all this, an example of variable cost analysis based on the break-even point model is analyzed at the end.

Variable costs of the enterprise. Definition and their economic meaning

Variable costs of the enterprise (EnglishVariableCost,V.C.) are the costs of the enterprise/company, which vary depending on the volume of production/sales. All costs of an enterprise can be divided into two types: variable and fixed. Their main difference is that some change with increasing production volume, while others do not. If production activity the company ceases, then variable costs disappear and become equal to zero.

Variable costs include:

The cost of raw materials, materials, fuel, electricity and other resources involved in production activities.
Cost of manufactured products.
Wages of working personnel (part of the salary depends on the standards met).
Percentages on sales to sales managers and other bonuses. Interest paid to outsourcing companies.
Taxes that have a tax base based on the size of sales and sales: excise taxes, VAT, unified tax on premiums, tax according to the simplified tax system.

What is the purpose of calculating the variable costs of an enterprise?

For any economic indicator, coefficient and concept, one should see their economic meaning and the purpose of their use. If we talk about the economic goals of any enterprise/company, then there are only two of them: either increasing income or reducing costs. If we summarize these two goals into one indicator, we get the profitability/profitability of the enterprise. The higher the profitability/profitability of an enterprise, the greater its financial reliability, the greater the opportunity to attract additional borrowed capital, expand its production and technical capacities, increase intellectual capital, increase its value in the market and investment attractiveness.

The classification of enterprise costs into fixed and variable is used for management accounting, and not for accounting. As a result, there is no such item as “variable costs” in the balance sheet.

Determining the size of variable costs in general structure of all enterprise costs allows you to analyze and consider various management strategies for increasing the profitability of the enterprise.

Amendments to the definition of variable costs

When we introduced the definition of variable costs/costs, we were based on a model of linear dependence of variable costs and production volume. In practice, variable costs often do not always depend on the size of sales and output, so they are called conditionally variable (for example, the introduction of automation of part production functions and as a result of a decrease in wages for the production rate of production personnel).

The situation is similar with fixed costs; in reality, they are also semi-fixed and can change with production growth (increasing rent for industrial premises, changes in the number of personnel and the consequence of wages. You can read more about fixed costs in my article: “”.

Classification of enterprise variable costs

In order to better understand how to understand what variable costs are, consider the classification of variable costs according to various criteria:

Depending on the size of sales and production:

Proportional costs. Elasticity coefficient =1. Variable costs increase in direct proportion to the growth of production volume. For example, production volume increased by 30% and costs also increased by 30%.
Progressive costs (analogous to progressive-variable costs). Elasticity coefficient >1. Variable costs have a high sensitivity to change depending on the size of output. That is, variable costs increase relatively more with production volume. For example, production volume increased by 30% and costs by 50%.
Degressive costs (analogous to regressive-variable costs). Elasticity coefficient< 1. При увеличении роста производства переменные издержки предприятия уменьшаются. This effect received the name “economy of scale” or “effect of mass production”. For example, production volume increased by 30%, but variable costs increased only by 15%.

The table shows an example of changes in production volume and the size of variable costs for their various types.

According to statistical indicators, there are:

Total variable costs ( EnglishTotalVariableCost,TVC) – include the totality of all variable costs of the enterprise for the entire range of products.
Average Variable Cost (AVC) AverageVariableCost) – average variable costs per unit of product or group of goods.

According to the method of financial accounting and attribution to the cost of manufactured products:

Variable direct costs are costs that can be attributed to the cost of goods manufactured. Everything is simple here, these are the costs of materials, fuel, energy, wages, etc.
Variable indirect costs are costs that depend on the volume of production and it is difficult to assess their contribution to the cost of production. For example, during the industrial separation of milk into skim milk and cream. Determining the amount of costs in the cost price of skim milk and cream is problematic.

In relation to the production process:

Production variable costs - costs of raw materials, supplies, fuel, energy, wages of workers, etc.
Non-production variable costs are costs not directly related to production: commercial and administrative expenses, for example: transportation costs, commission to an intermediary/agent.

Formula for calculating variable costs/expenses

As a result, you can write a formula for calculating variable costs:

Variable costs = Costs of raw materials + Materials + Electricity + Fuel + Bonus part of salary + Interest on sales to agents;

Variable costs= Marginal (gross) profit – Fixed costs;

The combination of variable and fixed costs and constants constitute the total costs of the enterprise.

Total costs= Fixed costs + Variable costs.

The figure shows the graphical relationship between enterprise costs.

How to reduce variable costs?

One strategy for reducing variable costs is to use “economies of scale.” With an increase in production volume and the transition from serial to mass production, economies of scale appear.

Economies of scale graph shows that as production volume increases, a turning point is reached when the relationship between costs and production volume becomes nonlinear.

At the same time, the rate of change in variable costs is lower than the growth of production/sales. Let's consider the reasons for the appearance of the “production scale effect”:

Reducing management personnel costs.
Use of R&D in production. An increase in output and sales leads to the possibility of conducting expensive scientific research research work to improve production technology.
Narrow product specialization. Focusing the entire production complex on a number of tasks can improve their quality and reduce the amount of defects.
Production of products similar in the technological chain, additional capacity utilization.

Variable costs and break-even point. Example calculation in Excel

Let's consider the break-even point model and the role of variable costs. The figure below shows the relationship between changes in production volume and the size of variables, constants and total costs. Variable costs are included in total costs and directly determine the break-even point. More

When the enterprise reaches a certain volume of production, an equilibrium point occurs at which the amount of profit and loss coincides, net profit in this case equals zero, and marginal profit equals fixed costs. Such a point is called break-even point, and it shows the minimum critical level of production at which the enterprise is profitable. In the figure and calculation table presented below, 8 units are achieved by producing and selling. products.

The enterprise's task is to create security zone and ensure a level of sales and production that would ensure the maximum distance from the break-even point. The further an enterprise is from the break-even point, the higher the level of its financial stability, competitiveness and profitability.

Let's look at an example of what happens to the break-even point when variable costs increase. The table below shows an example of changes in all indicators of income and costs of an enterprise.

As variable costs increase, the break-even point shifts. The figure below shows a graph for achieving the break-even point in a situation where the variable costs of producing one unit of steel are not 50 rubles, but 60 rubles. As we can see, the break-even point became equal to 16 units of sales/sales or 960 rubles. income.

This model usually operates linear dependencies between production volume and income/costs. In real practice, dependencies are often nonlinear. This arises due to the fact that production/sales volume is influenced by: technology, seasonality of demand, influence of competitors, macroeconomic indicators, taxes, subsidies, economies of scale, etc. To ensure the accuracy of the model, it should be used in the short term for products with stable demand (consumption).

Summary

In this article, we examined various aspects of variable costs/costs of an enterprise, what forms them, what types of them exist, how changes in variable costs and changes in the break-even point are related. Variable costs are the most important indicator enterprises in management accounting, to create planned tasks departments and managers to find ways to reduce their weight in overall costs. To reduce variable costs, production specialization can be increased; expand the range of products using the same production facilities; increase the share of scientific and production developments to improve efficiency and quality of output.

Of great importance in choosing an accounting and costing system is the grouping of costs in relation to production volume. Based on this criterion, costs are divided into fixed and variable.

Variables are costs whose value changes with changes in production volume. These include the costs of raw materials and materials, fuel and energy for technological purposes, wages of production workers, etc.

Constant costs include costs whose value does not change or changes slightly with changes in production volume. These include general business expenses, etc.

Some costs are called mixed because they have both variable and fixed components. These are sometimes called semi-variable and semi-fixed costs. All direct costs are variable costs, and general production, general and commercial expenses contain both variable and fixed cost components. For example, a monthly telephone fee includes a constant amount of the subscription fee and a variable part, which depends on the number and duration of long-distance and international telephone calls. Therefore, when accounting for costs, they must be clearly distinguished between fixed and variable costs.

The division of costs into fixed and variable is of great importance for planning, accounting and analysis of product costs. Fixed costs, while remaining relatively unchanged in absolute value, with an increase in production become an important factor in reducing the cost of goods, since their value decreases per unit of goods. When managing fixed costs, it should be borne in mind that their high level is determined to a large extent by industry characteristics, which determine different levels of capital intensity of products, differentiation of the level of mechanization and automation. In addition, fixed costs are less amenable to rapid change. Despite objective limitations, every enterprise has opportunities to reduce the amount and specific gravity fixed costs. Such reserves include: reduction of administrative and management costs in the event of unfavorable commodity market conditions; sale of unused equipment and intangible assets; use of leasing and rental of equipment; reduction of utility bills, etc.

Variable costs increase in direct proportion to the growth of production, but calculated per unit of production, they represent a constant value. When managing variable costs, the main task is to save them. Savings on these costs can be achieved through the implementation of organizational and technical measures that ensure their reduction per unit of output - increasing labor productivity and thereby reducing the number of production workers; reduction of inventories of raw materials, supplies and finished products during periods of unfavorable market conditions. In addition, this grouping of costs can be used in analyzing and forecasting break-even production and, ultimately, in choosing the economic policy of an enterprise.

Fixed costs do not depend on the size of production. Their value is unchanged because they are connected with the very existence of the enterprise and must be paid even if the enterprise does not produce anything. These include: rent, costs of maintaining management personnel, depreciation charges for buildings and structures. These costs are sometimes called indirect or overhead.

Variable costs depend on the quantity of products produced, since they consist of the costs of raw materials, materials, labor, energy and other consumable production resources.

The division of costs into fixed and variable is the basis of a method that is widespread in economics. It was first proposed in 1930 by engineer Walter Rautenstrauch as a planning method known as the critical production schedule or break-even schedule (Fig. 19).

The break-even chart in its various modifications is widely used in modern economics. The undoubted advantage of this method is that with its help you can quickly obtain a fairly accurate forecast of the main performance indicators of an enterprise when market conditions change.

When constructing a break-even schedule, it is assumed that there are no changes in prices for raw materials and products during the period for which planning is carried out; fixed costs are considered constant over a limited range of sales volumes; variable costs per unit of output do not change as sales volume changes; sales are carried out quite evenly.

When plotting a graph, the horizontal axis shows the volume of production in units of products or as a percentage of production capacity utilization, and the vertical axis shows production costs and income. Costs are deferred and divided into fixed (POI) and variable (PI). In addition to the lines of fixed and variable costs, the graph displays gross costs (VI) and revenue from sales of products (VR).

The point of intersection of the revenue and gross cost lines represents the break-even point (K). This point is interesting because with the corresponding volume of production and sales (V kr), the enterprise has neither profit nor loss. The production volume corresponding to the break-even point is called critical. When the production volume is less than critical, the enterprise cannot cover its costs with its revenue and, therefore, the result of its activities is losses. If the volume of production and sales exceeds the critical level, the enterprise makes a profit.

The break-even point can be determined and analytical method.

Revenue from product sales is determined by the expression

Where POI– fixed costs; PI – variable costs; P- profit.

If we take into account that at the break-even point profit is zero, then the point of critical production volume can be found using the formula

Sales revenue is the product of sales volume and product price. The total amount of variable costs can be calculated as the product of variable costs per unit of production and the volume of production corresponding to sales volume. Since at the break-even point the volume of production (sales) is equal to the critical volume, the previous formula takes the following form:

Where C– unit price; SPI– variable costs per unit of production; IN cr- critical release.

Using break-even analysis, you can not only calculate the critical production volume, but also the volume at which the planned (target) profit can be obtained. This method allows you to choose the best option when comparing several technologies, etc.

The benefits of dividing costs into fixed and variable parts are used by many modern enterprises. Along with this, cost accounting at full cost and their corresponding grouping are widely used.

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:

Explicit is a type of direct cash costs for making payments, commission payments to trading companies, payment for banking services, transportation costs, etc.;
Implicit, which includes the cost of using the resources of the organization's owners, not provided for by contractual obligations for explicit payment.
Fixed investments are investments to ensure stable costs during the production process.
Variables are special costs that can be easily adjusted without affecting operations depending on changes in production volumes.
Irrevocable – special option spending movable assets invested in production without return. These types of expenses occur at the beginning of release new products or reorientation of the enterprise. Once spent, funds can no longer be used to invest in other business processes.
Average is the estimated cost that determines the amount of capital investment per unit of output. Based on this value, the unit price of the product is formed.
Marginal is the maximum amount of costs that cannot be increased due to the ineffectiveness of further investments in production.
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 analysis 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 always need to understand that the constant amount of 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 depending on production factors. Depending on these characteristics economic costs for a certain, short period of time are called constants or variables.

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 relate following costs on the:

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 affected 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 expenses per calendar year:

Payment for renting the premises in the amount of 25,000 rubles.
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 fixed 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.

For information on what fixed and variable costs are and what applies to them, see next video material:

The size of which depends on the intensity of production. Variable costs are the opposite fixed costs. The key feature by which variable costs are identified is their disappearance when production is suspended.

What are variable costs?

Variable costs include the following:

Piece-rate wages for workers tied to personal results.

Expenses for the purchase of raw materials and components for production maintenance.

Interest and bonuses paid to consultants and sales managers based on the results of plan implementation.

The amount of taxes based on production and sales volumes. These are the following taxes: VAT, excise taxes, according to the simplified tax system.

Expenses for paying for the services of service organizations, for example, goods transportation services or sales outsourcing.

The cost of fuel and electricity consumed directly in the workshops. An important distinction is made here: energy used in administrative buildings and offices is a fixed cost.

Break-even point and types of variable costs

The value of VC varies in proportion to the size of total costs. When determining the break-even point, it is assumed that variable costs are proportional to production volume:

However, this is not always the case. An exception may be, for example, the introduction of a night shift. Since the night is higher, variable costs will increase at a greater rate than production volumes. Based on this feature, there are three types of VC:

Proportional.

Regressive variable - costs increase at a slower rate than. This effect is known as “economy of scale.”

Progressive-variable - the rate of cost growth is higher.

Calculation of VC indicator

The classification of costs into fixed and variable is not used at all for accounting(there is no line “variable costs” in the balance sheet), but for management analysis. Calculation of variable costs is advisable because it gives the manager the opportunity to manage the profitability and profitability of the organization.

To determine the value of variable costs, methods such as algebraic, statistical, graphical, regression-correlation and others are used. The most famous and widespread is considered algebraic method, according to which the following formula can be used to determine the value of VC:

Algebraic analysis assumes that the subject of the study has such information as the volume of production in physical terms (X) and the size of the corresponding costs (Z) for at least two points of production.

Also often used margin method, based on the definition of magnitude marginal income, which is the difference between the organization's profit and total variable costs.

Breaking point: how to minimize variable costs?

A popular strategy for minimizing variable costs is to determine " points fracture" - such a volume of production at which variable costs stop increasing proportionally and reduce the growth rate:

There may be several reasons for this effect. Among them:

1. Reducing labor costs for management personnel.

2. Application of a focusing strategy, which consists of increasing the specialization of production.

4. Integration innovative developments into the production process.

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