Types of costs are fixed and variable. Fixed and variable expenses

Enterprise expenses can be considered in the analysis from various points of view. Their classification is based on various signs. From the perspective of the influence of product turnover on costs, they can be dependent or independent of increased sales. Variable costs, the definition of which requires careful consideration, allow the head of the company to manage them by increasing or decreasing sales of finished products. That's why they are so important to understand proper organization activities of any enterprise.

general characteristics

Variable Costs (VC) are those costs of an organization that change with an increase or decrease in the growth of sales of manufactured products.

For example, when a company ceases operations, variable costs should be zero. In order for a company to operate effectively, it will need to regularly evaluate its costs. After all, they influence the cost of finished products and turnover.

Such points.

The book value of raw materials, energy resources, materials that are directly involved in the production of finished products.
Cost of manufactured products.
Salaries of employees depending on the implementation of the plan.
Percentage from the activities of sales managers.
Taxes: VAT, tax according to the simplified tax system, unified tax.

Understanding Variable Costs

To correctly understand such a concept, their definitions should be considered in more detail. Thus, production is in the process of fulfilling its production programs spends a certain amount of materials from which the final product will be made.

These costs can be classified as variable direct costs. But some of them should be separated. A factor such as electricity can also be classified as a fixed cost. If the costs of lighting the territory are taken into account, then they should be classified specifically in this category. Electricity directly involved in the process of manufacturing products is classified as variable costs in the short term.

There are also costs that depend on turnover, but are not directly proportional production process. This trend may be caused by insufficient (or over) utilization of production, or a discrepancy between its designed capacity.

Therefore, in order to measure the effectiveness of an enterprise in managing its costs, variable costs should be considered as subject to a linear schedule along the segment of normal production capacity.

Classification

There are several types of classifications variable costs. With changes in sales costs, they are distinguished:

proportional costs, which increase in the same way as production volume;
progressive costs, increasing at a faster rate than sales;
degressive costs, which increase at a slower rate with increasing production rates.

According to statistics, a company's variable costs can be:

general (Total Variable Cost, TVC), which are calculated for the entire product range;
average (AVC, Average Variable Cost), calculated per unit of product.

According to the method of accounting for the cost of finished products, a distinction is made between variables (they are easy to attribute to the cost) and indirect (it is difficult to measure their contribution to the cost).

Regarding the technological output of products, they can be production (fuel, raw materials, energy, etc.) and non-production (transportation, interest to the intermediary, etc.).

General variable costs

The output function is similar to variable cost. It is continuous. When all costs are brought together for analysis, the total variable costs for all products of one enterprise are obtained.

When common variables are combined and their total sum in the enterprise is obtained. This calculation is carried out in order to identify the dependence of variable costs on production volume. Next, use the formula to find variable marginal costs:

MC = ΔVC/ΔQ, where:

MC - marginal variable costs;
ΔVC - increase in variable costs;
ΔQ is the increase in output volume.

Calculation of average costs

Average variable costs (AVC) are the company's resources spent per unit of production. Within a certain range, production growth has no effect on them. But when the design power is reached, they begin to increase. This behavior of the factor is explained by the heterogeneity of costs and their increase at large scales of production.

The presented indicator is calculated as follows:

AVC=VC/Q, where:

VC - the number of variable costs;
Q is the quantity of products produced.

In terms of measurement, average variable costs in the short run are similar to the change in average total costs. The greater the output of finished products, the more total costs begin to correspond to the increase in variable costs.

Calculation of variable costs

Based on the above, we can define the variable cost (VC) formula:

VC = Material costs + Raw materials + Fuel + Electricity + Bonus salary + Percentage on sales to agents.
VC = Gross profit- fixed costs.

The sum of variable and fixed costs is equal to the total costs of the organization.

Variable costs, an example of calculation of which was presented above, participate in the formation of their overall indicator:

Total costs = Variable costs + Fixed costs.

Example definition

To better understand the principle of calculating variable costs, you should consider an example from the calculations. For example, a company characterizes its product output with the following points:

Costs of materials and raw materials.
Energy costs for production.
Salaries of workers producing products.

It is argued that variable costs grow in direct proportion to the increase in sales of finished products. This fact is taken into account to determine the break-even point.

For example, it was calculated that it amounted to 30 thousand units of production. If you plot a graph, the break-even production level will be zero. If the volume is reduced, the company’s activities will move to the level of unprofitability. And similarly, with an increase in production volumes, the organization will be able to receive a positive net profit result.

How to reduce variable costs

The strategy of using “economies of scale”, which manifests itself when production volumes increase, can increase the efficiency of an enterprise.

The reasons for its appearance are the following.

Using the achievements of science and technology, conducting research, which increases the manufacturability of production.
Reducing management salary costs.
Narrow specialization of production, which allows you to carry out every stage production tasks better quality. At the same time, the defect rate decreases.
Introduction of technologically similar product production lines, which will ensure additional capacity utilization.

At the same time, variable costs are observed below sales growth. This will increase the efficiency of the company.

Having become familiar with the concept of variable costs, an example of the calculation of which was given in this article, financial analysts and managers can develop a number of ways to reduce overall production costs and reduce production costs. This will make it possible to effectively manage the rate of turnover of the enterprise’s products.

Any company operates to generate income, and its work is impossible without money spent. Exist different kinds such expenses. There are types of activities that require constant financial investments. But some of the costs are not regular, and their impact on the progress of the product and its sales must also be taken into account.

So, the main point of any company is to release a product and generate income from it. To start this activity, you first need to purchase raw materials, production tools, hire labor. Certain funds are spent on this; in economics they are called costs.

People invest in production activities for a variety of purposes. In accordance with this, a classification of expenses was adopted. Cost categories (depending on properties):

Explicit. Such costs are incurred directly for the payment of wages to employees, commissions to other organizations, payment for the activities of banks and transport.
Implicit. Costs for the needs of company managers that are not specified in contracts.
Permanent. Means that ensure continuous production processes.
Variables. Costs that can be easily adjusted while maintaining the same level of product output.
Non-refundable. Expenses of movable assets that are invested in the company's activities free of charge. Characteristic of the initial period of production or re-profiling of an organization. These funds can no longer be spent on other organizations.
Average. Costs obtained during calculations that characterize investments in each unit of product. This indicator contributes to the pricing of the product.
Limit. This is the largest cost that cannot be increased due to the low efficiency of capital investments in the company.
Appeals. Costs of delivering goods from manufacturer to consumer.

Application of fixed and variable costs

Let's consider the differences between fixed costs and variable costs and their economic characteristics.

The first type of costs (fixed) designed for investment in the manufacture of a product in a separate production cycle. In each organization, their size is individual, so the enterprise considers them separately, taking into account the analysis of the release process. Please note that such costs will not differ from the initial production stage to the sale of products to the consumer.

Second type of costs (variables) changes in each production cycle, with virtually no repetitions of this indicator.

The two types of costs together make up the total costs, which are calculated at the end of the production process.

Simply put, fixed costs- those that do not change over a certain period of time. What can be attributed to them?

Payment of utilities;
Costs of operating premises;
Payment of rent;
Salaries of staff;

It must be taken into account that the constant level of total costs used in a specific time period of production, during one cycle, applies only to total number units of goods produced. If such costs are calculated for each unit, their size will decrease in accordance with the increase in output. This fact applies to all types of production.

Variable costs are proportional to the changing quantity or volume of goods produced. These include:

Energy costs;
Material costs;
Negotiated wages.

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

Examples of costs:

Each production cycle corresponds to a specific amount of costs that remain unchanged under any conditions. There are other costs that depend on production resources. As was previously established, costs over a short period of time can be variable or constant.

Such characteristics are not suitable for a long time, because the costs will vary in this case.

Examples of fixed costs

Fixed costs remain at the same level for any volume of product output, in a short time period. These are costs for the company's stable factors that are not proportional to the number of units of the product. Examples of such expenses are:

payment of interest on a bank loan;
depreciation expenses;
payment of interest on bonds;
salaries for managers at the enterprise;
insurance costs.

All costs independent of the production of a product, which are constant in a short period of the production cycle, can be called constant.

Variable Cost Examples

Variable costs, on the contrary, are essentially investments in the production of goods, and therefore depend on its volume. The amount of investment is directly proportional to the quantity of goods produced. Examples could include costs for:

for raw material reserves;
payment of bonuses to employees producing products;
delivery of materials and the product itself;
energetic resources;
equipment;
other expenses for the production of goods or provision of services.

Consider the variable cost graph, which is a curve. (Figure 1.)

Fig. 1 - graph of variable costs

The path of this line from the origin to point A depicts the increase in costs as the quantity of goods produced increases. Section AB: more rapid increase in costs in conditions of mass production. Variable costs may be affected by disproportionate costs of transport services or Consumables, improper use of a released product with reduced demand for it.

Example of calculating production costs:

Let's consider the calculation of fixed and variable costs for specific example. Let's say a shoe company produces 2,000 pairs of boots per year. During this time, the factory spends funds on the following needs:

rent – 25,000 rub.;
interest on a bank loan - 11,000 rubles;
payment for the production of one pair of shoes - 20 rubles;
raw materials for the production of a pair of boots - 12 rubles.

Our task: to calculate variable, fixed costs, as well as the funds spent on each pair of shoes.

In this case, only rent and loan payments can be called fixed costs. Such expenses are unchangeable, depending on production volumes, so they are easy to calculate: 25,000 + 11,000 = 36,000 rubles.

The cost of producing one pair of shoes is variable costs: 20+12=32 rubles.

Consequently, annual variable costs are calculated as follows: 2000 * 32 = 64,000 rubles.

General costs– this is the sum of variables and constants: 36000+64000=100000 rubles.

Average total cost per pair of shoes: 100,000/20=50

Production cost planning

It is important for each company to correctly calculate, plan and analyze production costs.

In the process of cost analysis, options for the economical use of finances are considered, which are invested in production and must be distributed correctly. This leads to a reduction in production costs, and hence the final price of the manufactured product, as well as an increase in the company’s competitiveness and an increase in its income.

The task of each company is to save as much as possible on production and optimize this process so that the enterprise develops and becomes more successful. As a result of these measures, the profitability of the organization increases, which means there are more opportunities to invest in it.

To plan production costs, you need to take into account their sizes in previous cycles. In accordance with the volume of goods produced, a decision is made to reduce or increase production costs.

Balance Sheet and Costs

Among the accounting documentation of each company there is a “Profit and Loss Statement”. All information about expenses is recorded there.

A little more about this document. This report does not characterize the property status of the enterprise in general, but provides information about its activities for the selected time period. In accordance with OKUD, the profit and loss statement has form 2. In it, income and expense indicators are recorded progressively from the beginning to the end of the year. The report includes a table in which line 020 displays the organization's main expenses, line 029 shows the difference between profit and costs, line 040 shows expenses included in account 26. The latter represent travel costs, payment for premises and labor protection, and employee benefits. Line 070 shows the company's interest on loan obligations.

The initial calculation results (when reporting) are divided into direct and indirect costs. If we consider these indicators separately, then direct costs can be considered fixed costs, and indirect costs - variable.

The balance sheet does not record costs directly; it only shows the assets and financial liabilities of the business.

Accounting costs (otherwise known as explicit costs)- This is payment in monetary terms for any transactions. They have a close relationship with the economic costs and income of the company. Let's subtract explicit costs from the company's profit, and if we get zero, then the organization has used its resources in the most correct way.

Example of cost calculation

Let's consider an example of calculating accounting and economic costs and profits. The owner of a recently opened laundry planned to receive an income of 120,000 rubles a year. To do this, he will have to cover the costs:

rental of premises - 30,000 rubles;
salary for administrators - 20,000 rubles;
purchase of equipment - 60,000 rubles;
other small expenses - 15,000 rubles;

Loan payments – 30%, deposit – 25%.

The head of the enterprise purchased the equipment at his own expense. Washing machines subject to breakdown after some time. Taking this into account, you need to create a depreciation fund, into which 6,000 rubles will be transferred every year. All of the above are obvious expenses. Economic costs– possible profit for the laundry owner if a deposit is purchased. To pay the initial expenses, he will have to use a bank loan. Loan in the amount of 45,000 rubles. will cost him 13,500 rubles.

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

Accounting income: 120-104.5=15.5 thousand rubles.

Economic income: 15.5-15=0.5 thousand rubles.

Accounting and economic costs differ from each other, but they are usually considered together.

The value of production costs

Production costs form the law of economic demand: with an increase in the price of a product, the level of its market supply increases, and with a decrease, the supply also decreases, while other conditions remain the same. The essence of the law is that every manufacturer wants to offer maximum amount goods at highest price, which is most beneficial.

For the buyer, the cost of the product is a limiting factor. The high price of a product forces the consumer to buy less of it; and accordingly, cheaper products are purchased in larger volumes. The manufacturer receives a profit for the released product, so he strives to produce it in order to acquire revenue from each unit of the product, in the form of its price.

What is the main role of production costs? Let's consider it using the example of processing industrial enterprise. Over a certain period of time, production costs increase. To compensate for them, you need to raise the price of the product. The increase in costs is due to the fact that it is impossible to quickly expand the production area. The equipment is overloaded, which reduces the efficiency of the enterprise. Thus, to produce a product at the highest cost, the firm must set a higher price for it. Price and supply level are directly related.

2.3.1. Production costs in a market economy.

Production costs – This is the monetary cost of purchasing the factors of production used. Most cost effective method production is considered to be one in which production costs are minimized. Production costs are measured in value terms based on the costs incurred.

Production costs – costs that are directly associated with the production of goods.

Distribution costs – costs associated with the sale of manufactured products.

The economic essence of costs is based on the problem of limited resources and alternative use, i.e. the use of resources in this production excludes the possibility of using it for another purpose.

The task of economists is to choose the most optimal option for using factors of production and minimizing costs.

Internal (implicit) costs – These are monetary incomes that the company donates, independently using its resources, i.e. These are the income that could be received by the company for independently used resources under the best of conditions. possible ways their applications. Opportunity cost is the amount of money required to divert a particular resource from the production of good B and use it to produce good A.

Thus, the costs in cash that the company incurred in favor of suppliers (labor, services, fuel, raw materials) are called external (explicit) costs.

Dividing costs into explicit and implicit are two approaches to understanding the nature of costs.

1. Accounting approach: Production costs should include all real, actual expenses in cash (salaries, rent, alternative costs, raw materials, fuel, depreciation, social contributions).

2. Economic approach: production costs should include not only actual costs in cash, but also unpaid costs; associated with missed opportunities for the most optimal use of these resources.

Short term(SR) is the period of time during which some factors of production are constant and others are variable.

Constant factors are the overall size of buildings, structures, the number of machines and equipment, the number of firms that operate in the industry. Therefore, the possibility of free access of firms to the industry in the short term is limited. Variables – raw materials, number of workers.

Long term(LR) – the period of time during which all factors of production are variable. Those. During this period, you can change the size of buildings, equipment, and the number of companies. During this period, the company can change all production parameters.

Classification of costs

Fixed costs (F.C.) – costs, the value of which in the short term does not change with an increase or decrease in production volume, i.e. they do not depend on the volume of products produced.

Example: building rent, equipment maintenance, administration salary.

C is the amount of costs.

The fixed cost graph is a straight line parallel to the OX axis.

Average fixed costs (A F C) – fixed costs that fall on a unit of output and are determined by the formula: A.F.C. = F.C./ Q

As Q increases, they decrease. This is called overhead allocation. They serve as an incentive for the company to increase production.

The graph of average fixed costs is a curve that has a decreasing character, because As production volume increases, total revenue increases, then average fixed costs represent an increasingly smaller value per unit of product.

Variable costs (V.C.) – costs, the value of which changes depending on the increase or decrease in production volume, i.e. they depend on the volume of products produced.

Example: costs of raw materials, electricity, auxiliary materials, wages (workers). The main share of costs is associated with the use of capital.

The graph is a curve proportional to the volume of output and increasing in nature. But her character can change. In the initial period, variable costs grow at a higher rate than manufactured products. As you reach optimal sizes production (Q 1) there is a relative saving of VC.

Average variable costs (AVC) – the volume of variable costs that falls on a unit of output. They are determined by the following formula: by dividing VC by the volume of output: AVC = VC/Q. First the curve falls, then it is horizontal and increases sharply.

A graph is a curve that does not start at the origin. The general nature of the curve is increasing. The technologically optimal output size is achieved when AVCs become minimal (i.e. Q – 1).

Total costs (TC or C) – the totality of a firm's fixed and variable costs associated with producing products in the short term. They are determined by the formula: TC = FC + VC

Another formula (function of volume industrial products): TC = f (Q).

Depreciation and amortization

Wear- This is the gradual loss of capital resources of their value.

Physical deterioration – loss of the consumer qualities of the means of labor, i.e. technical and production properties.

A decrease in the value of capital goods may not be associated with their loss of consumer qualities; then they speak of obsolescence. It is due to an increase in the efficiency of production of capital goods, i.e. the emergence of similar, but cheaper new means of labor that perform similar functions, but are more advanced.

Obsolescence is a consequence of scientific and technological progress, but for the company this results in increased costs. Obsolescence refers to changes in fixed costs. Physical wear and tear is a variable cost. Capital goods last more than one year. Their cost is transferred to finished products gradually as it wears out - this is called depreciation. Part of the revenue for depreciation is formed in the depreciation fund.

Depreciation deductions:

Reflect an assessment of the amount of depreciation of capital resources, i.e. are one of the cost items;

Serves as a source of reproduction of capital goods.

The state legislates depreciation rates, i.e. the percentage of the value of capital goods by which they are considered to be worn out during the year. It shows how many years the cost of fixed assets must be reimbursed.

Average Total Cost (ATC) – the sum of the total costs per unit of production output:

ATS = TC/Q = (FC + VC)/Q = (FC/Q) + (VC/Q)

The curve is V-shaped. The production volume corresponding to the minimum average total cost is called the point of technological optimism.

Marginal Cost (MC) – an increase in total costs caused by an increase in production by the next unit of output.

Determined by the following formula: MS = ∆TC/ ∆Q.

It can be seen that fixed costs do not affect the value of MS. And MC depends on the increment of VC associated with an increase or decrease in production volume (Q).

Marginal cost shows how much it would cost the firm to increase output per unit. They decisively influence the firm’s choice of production volume, because This is exactly the indicator that the company can influence.

The graph is similar to AVC. The MC curve intersects the ATC curve at the point corresponding to minimum value total costs.

In the short run, the company's costs are fixed and variable. This follows from the fact that the company’s production capacity remains unchanged and the dynamics of indicators is determined by the increase in equipment utilization.

Based on this graph, you can build a new graph. Which allows you to visualize the company’s capabilities, maximize profits and view the boundaries of the company’s existence in general.

For making a firm's decision, the most important characteristic is the average value; average fixed costs fall as production volume increases.

Therefore, the dependence of variable costs on the production growth function is considered.

At stage I, average variable costs decrease and then begin to grow under the influence of economies of scale. During this period, it is necessary to determine the break-even point of production (TB).

TB is the level of physical sales volume over an estimated period of time at which revenue from product sales coincides with production costs.

Point A – TB, at which revenue (TR) = TC

Restrictions that must be observed when calculating TB

1. The volume of production is equal to the volume of sales.

2. Fixed costs are the same for any volume of production.

3. Variable costs change in proportion to the volume of production.

4. The price does not change during the period for which the TB is determined.

5. The price of a unit of production and the cost of a unit of resources remain constant.

Law of Diminishing Marginal Returns is not absolute, but relative in nature and it operates only in the short term, when at least one of the factors of production remains unchanged.

Law: with the growth of someone’s use of a factor of production, with the rest remaining unchanged, sooner or later a point is reached, starting from which additional use variable factors leads to a decrease in production growth.

The operation of this law presupposes the unchanged state of technical and technological production. And therefore, technological progress can change the scope of this law.

The long-run period is characterized by the fact that the firm is able to change all the factors of production used. During this period variable nature of all used production factors allows the company to use the most optimal combinations of them. This will affect the magnitude and dynamics of average costs (costs per unit of production). If a firm decides to increase production volume, but by initial stage(ATS) will first decrease, and then, when more and more new capacities are involved in production, they will begin to increase.

The graph of long-term total costs shows seven different options (1 – 7) for the behavior of ATS in short-term periods, because The long-term period is the sum of the short-term periods.

The long-run cost curve consists of options called stages of growth. In each stage (I – III) the company operates in the short term. The dynamics of the long-run cost curve can be explained using economies of scale. The company changes the parameters of its activities, i.e. the transition from one type of enterprise size to another is called change in scale of production.

I – in this time interval, long-term costs decrease with an increase in the volume of output, i.e. there are economies of scale - a positive effect of scale (from 0 to Q 1).

II – (this is from Q 1 to Q 2), at this time interval of production, the long-term ATS does not react to an increase in production volume, i.e. remains unchanged. And the firm will have a constant effect from changes in the scale of production (constant returns to scale).

III – long-term ATC increases with an increase in output and there is damage from an increase in the scale of production or diseconomies of scale(from Q 2 to Q 3).

3. IN general view profit is defined as the difference between total revenue and total costs for a certain period of time:

SP = TR –TS

TR ( total revenue) - the amount of cash received by a company from the sale of a certain amount of goods:

TR = P* Q

AR(average revenue) is the amount of cash receipts per unit of products sold.

Average revenue is equal to the market price:

AR = TR/ Q = PQ/ Q = P

M.R.(marginal revenue) is the increase in revenue that arises from the sale of the next unit of production. Under perfect competition, it is equal to the market price:

M.R. = ∆ TR/∆ Q = ∆(PQ) /∆ Q =∆ P

In connection with the classification of costs into external (explicit) and internal (implicit), different concepts of profit are assumed.

Explicit costs (external) are determined by the amount of expenses of the enterprise to pay for purchased factors of production from outside.

Implicit costs (internal) determined by the cost of resources owned by a given enterprise.

If we subtract external costs from total revenue, we get accounting profit - takes into account external costs, but does not take into account internal ones.

If internal costs are subtracted from accounting profit, we get economic profit.

Unlike accounting profit, economic profit takes into account both external and internal costs.

Normal profit appears when total revenues enterprise or firm is equal total costs, counted as alternative. The minimum level of profitability is when it is profitable for an entrepreneur to run a business. “0” - zero economic profit.

Economic profit(clean) – its presence means that there is this enterprise resources are used more efficiently.

Accounting profit exceeds the economic value by the amount of implicit costs. Economic profit serves as a criterion for the success of an enterprise.

Its presence or absence is an incentive to attract additional resources or transfer them to other areas of use.

The company's goals are to maximize profit, which is the difference between total revenue and total costs. Since both costs and income are a function of production volume, the main problem for the company becomes determining the optimal (best) production volume. A firm will maximize profit at the level of output at which the difference between total revenue and total cost is greatest, or at the level at which marginal revenue equals marginal cost. If the firm's losses are less than its fixed costs, then the firm should continue to operate (in the short term); if the losses are greater than its fixed costs, then the firm should stop production.

In practice, the concept of production costs is usually used. This is due to the difference between the economic and accounting meaning of costs. Indeed, for an accountant, costs represent actual amounts of money spent, costs supported by documents, i.e. expenses.

Costs as an economic term include both the actual amount of money spent and lost profits. By investing money in any investment project, the investor is deprived of the right to use it in another way, for example, to invest it in a bank and receive a small, but stable and guaranteed interest, unless, of course, the bank goes bankrupt.

The best use of available resources is called economic theory opportunity cost or opportunity cost. It is this concept that distinguishes the term “costs” from the term “costs”. In other words, costs are costs reduced by the amount of opportunity cost. Now it becomes obvious why modern practice It is the costs that form the cost and are used to determine taxation. After all, opportunity cost is a rather subjective category and cannot reduce taxable profit. Therefore, the accountant deals specifically with costs.

However for economic analysis opportunity cost are of fundamental importance. It is necessary to determine the lost profit, and “is the game worth the candle?” It is precisely based on the concept of opportunity costs that a person who is able to create his own business and work “for himself” may prefer a less complex and stressful type of activity. It is based on the concept of opportunity cost that one can make a conclusion about the feasibility or inexpediency of making certain decisions. It is no coincidence that when determining the manufacturer, contractor and subcontractor, a decision is often made to announce an open competition, and when assessing investment projects in conditions where there are several projects, and some of them need to be postponed for a certain time, the lost profit coefficient is calculated.

Fixed and variable costs

All costs, minus alternative ones, are classified according to the criterion of dependence or independence on production volume.

Fixed costs are costs that do not depend on the volume of products produced. They are designated FC.

Fixed costs include expenses for paying technical personnel, security of premises, advertising of products, heating, etc. Fixed costs also include depreciation charges (for the restoration of fixed capital). To define the concept of depreciation, it is necessary to classify the assets of an enterprise into fixed and working capital.

Fixed capital is capital that transfers its value to finished products in parts (the cost of a product includes only a small part of the cost of the equipment with which the production of this product is carried out), and the value expression of the means of labor is called fixed production assets. The concept of fixed assets is broader, since they also include non-productive assets that may be on the balance sheet of an enterprise, but their value is gradually lost (for example, a stadium).

Capital that transfers its value to finished product during one turnover, spent on the purchase of raw materials for each production cycle is called circulating supply. Depreciation is the process of transferring the value of fixed assets to finished products in parts. In other words, equipment sooner or later wears out or becomes obsolete. Accordingly, it loses its usefulness. This happens due to natural causes(use, temperature fluctuations, structural wear, etc.).

Depreciation deductions are made monthly based on legally established depreciation rates and the book value of fixed assets. Depreciation rate - the ratio of the amount of annual depreciation to the cost of fixed assets production assets, expressed as a percentage. The state establishes different depreciation standards for separate groups fixed production assets.

The following methods of calculating depreciation are distinguished:

Linear (equal deductions over the entire service life of the depreciable property);

Declining balance method (depreciation is accrued on the entire amount only in the first year of equipment service, then accrual is made only on the non-transferred (remaining) part of the cost);

Cumulative, based on the sum of the numbers of years beneficial use(a cumulative number is determined that represents the sum of the numbers of years of useful use of the equipment, for example, if the equipment is depreciated over 6 years, then the cumulative number will be 6 + 5 + 4 + 3 + 2 + 1 = 21; then the price of the equipment is multiplied by the number of years of useful use and the resulting product is divided by a cumulative number, in our example, for the first year, depreciation charges for the cost of equipment of 100,000 rubles will be calculated as 100,000x6/21, depreciation charges for the third year will be, respectively, 100,000x4/21);

Proportional, in proportion to production output (depreciation per unit of production is determined, which is then multiplied by the volume of production).

In the context of the rapid development of new technologies, the state can use accelerated depreciation, which allows for more frequent replacement of equipment at enterprises. In addition, accelerated depreciation can be carried out within state support small businesses (depreciation deductions are not subject to income tax).

Variable costs are costs that directly depend on the volume of production. They are designated VC. Variable costs include the costs of raw materials, piecework wages workers (it is calculated based on the volume of products produced by the employee), part of the cost of electricity (since electricity consumption depends on the intensity of equipment operation) and other expenses depending on the volume of output.

The sum of fixed and variable costs is gross costs. Sometimes they are called complete or general. They are designated TS. It is not difficult to imagine their dynamics. It is enough to raise the variable cost curve by the amount of fixed costs, as shown in Fig. 1.

Rice. 1. Production costs.

The ordinate axis shows fixed, variable and gross costs, and the abscissa axis shows the volume of output.

When analyzing gross costs, it is necessary to pay attention to Special attention on their structure and its changes. Comparing gross costs with gross income is called gross performance analysis. However, for a more detailed analysis it is necessary to determine the relationship between costs and volume of output. To do this, the concept of average costs is introduced.

Average costs and their dynamics

Average costs are the costs of producing and selling a unit of product.

Average total costs (average gross costs, sometimes called simply average costs) are determined by dividing total costs by the number of products produced. They are designated ATS or simply AC.

Average variable costs are determined by dividing variable costs by the quantity produced.

They are designated AVC.

Average fixed costs are determined by dividing fixed costs by the number of products produced.

They are designated AFC.

It is quite natural that average total costs are the sum of average variable and average fixed costs.

Initially, average costs are high because starting a new production requires certain fixed costs, which are high per unit of output at the initial stage.

Gradually average costs decrease. This happens due to the increase in production output. Accordingly, as production volume increases, there are fewer and fewer fixed costs per unit of output. In addition, the growth in production allows us to purchase necessary materials and tools in large quantities, and this, as you know, is much cheaper.

However, after some time, variable costs begin to increase. This is due to the diminishing marginal productivity of factors of production. An increase in variable costs causes the beginning of an increase in average costs.

However, minimum average costs do not mean maximum profits. At the same time, analysis of the dynamics of average costs is of fundamental importance. It allows:

Determine the production volume corresponding to the minimum cost per unit of production;

Compare the cost per unit of output with the price per unit of output on the consumer market.

In Fig. Figure 2 shows a version of the so-called marginal firm: the price line touches the average cost curve at point B.

Rice. 2. Zero profit point (B).

The point where the price line touches the average cost curve is usually called the zero profit point. The company is able to cover the minimum costs per unit of production, but the opportunities for development of the enterprise are extremely limited. From the point of view of economic theory, a firm does not care whether it stays in a given industry or leaves it. This is due to the fact that at this point the owner of the enterprise receives normal compensation for the use of his own resources. From the point of view of economic theory, normal profit, considered as the return on capital at the best alternative its use is part of the cost. Therefore, the average cost curve also includes opportunity costs (it is not difficult to guess that in conditions of pure competition in the long term, entrepreneurs receive only the so-called normal profit, and there is no economic profit). The analysis of average costs must be complemented by the study of marginal costs.

Concept of marginal cost and marginal revenue

Average costs characterize the costs per unit of production, gross costs characterize costs as a whole, and marginal costs make it possible to study the dynamics of gross costs, try to anticipate negative trends in the future and ultimately draw a conclusion about the most optimal option production program.

Marginal cost is the additional cost incurred by producing an additional unit of output. In other words, marginal cost represents the increase in total cost for each unit increase in production. Mathematically, we can define marginal cost as follows:

MC = ΔTC/ΔQ.

Marginal cost shows whether producing an additional unit of output makes a profit or not. Let's consider the dynamics of marginal costs.

Initially, marginal costs decrease while remaining below average costs. This is due to lower unit costs due to positive economies of scale. Then, like average costs, marginal costs begin to rise.

Obviously, the production of an additional unit of output also increases total income. To determine the increase in income due to an increase in production, the concept of marginal income or marginal revenue is used.

Marginal revenue (MR) is the additional income obtained by increasing production by one unit:

MR = ΔR / ΔQ,

where ΔR is the change in enterprise income.

By subtracting marginal costs from marginal revenue, we get marginal profit (it can also be negative). Obviously, the entrepreneur will increase the volume of production as long as he remains able to receive marginal profits, despite its decline due to the law of diminishing returns.

Source - Golikov M.N. Microeconomics: teaching aid for universities. – Pskov: Publishing house PGPU, 2005, 104 p.

We have classified production costs. We indicated that costs in relation to production volume are divided into fixed and variable. We will tell you more about them in our material.

What costs depend on production volume

The costs of an organization that increase as production volume increases are called variable costs. The simplest and most understandable version of variable costs is proportional costs. Proportional costs are costs whose magnitude is proportional to the volume of production.

Let's give an example. For production 1 piece. Product A requires 5 kg of base material. Cost 1 kg. material - 100 rub. Accordingly, during production of 800 pcs. Product A will consume basic material in the amount of 400,000 rubles. (800 pcs. * 5 kg/pc. * 100 rub./kg).

If the production volume doubles to 1,600 pcs., the cost of materials will also double and amount to 800,000 rubles (1,600 pcs. * 5 kg/pc. * 100 rub./kg).

It is important to keep in mind that when calculating proportional costs, certain conditions are accepted. For example, in our example it is assumed that with an increase in the volume of materials purchased, its price per 1 kg will not change.

But in practice, as a rule, the so-called “economy of scale” comes into force. Therefore, variable costs are often still conditionally variable costs.

Fixed costs

Costs that do not depend on production volume are called fixed costs. This means that, regardless of the volume of production, the organization always bears fixed costs. And given that the total amount of costs of the organization is determined by the addition of fixed and variable costs, we can say that the total costs at zero production volume are equal to the value fixed costs. After all, if a manufacturing company does not produce anything during the reporting period, it will still have to pay rent for premises and wages to management personnel.

Specific fixed costs

When analyzing fixed costs, specific fixed costs are of interest, which are defined as the value of fixed costs per unit of production. Specific fixed costs decrease with increasing production volume. Let's show this with an example.

The amount of fixed costs for the reporting period is 100,000 rubles, and the volume of products produced is 10,000 units. Consequently, fixed costs per unit of production are 10 rubles (100,000 rubles / 10,000 units). If in the next reporting period the output volume increases to 12,000 units, specific fixed costs will decrease to 8.33 rubles (100,000 rubles / 12,000 units).

However, fixed costs in practice are also semi-fixed. This means that for a certain volume of production, costs defined as fixed can either increase or decrease. For example, the rental of warehouse premises, taken into account as a fixed expense, will also increase with a significant increase in sales volume, since the old warehouse will not be able to accommodate the volume of products produced and the company will have to rent another premises.

Marginal costs and production volumes

Marginal cost is the cost associated with producing an additional unit of output. This means that marginal costs arise as output increases. However, calculating their value is not always easy, because their size is not only variable costs per unit of production, but also part of the semi-fixed costs that may additionally arise when production volume increases.