In this article, we will consider the material intensity of the enterprise’s products and the formula for calculating the indicator for the business plan.
Material consumption of products
What is material intensity?
Material consumption- this is an indicator that reflects the consumption of materials per 1 ruble of manufactured products. This indicator is measured in money. It is used in the analysis and accounting of inventories in an enterprise. The indicator is the inverse of the indicator material productivity. Material productivity characterizes the amount of products produced from each ruble of reserves.
Material consumption. Calculation formula
Formula for calculating material consumption by balance next:
The indicator is the ratio of the cost of material inputs to the cost of the manufactured product. It shows the costs of raw materials, inventories and other resources per unit of production. The lower the material intensity indicator, the more finished products the enterprise can produce. Based on this formula, you can obtain an indicator of material productivity, which is the inverse of material intensity. The formula for calculating it on the balance sheet of the enterprise is as follows:
where: V is the cost of the manufactured product, M is the cost of material costs.
Material consumption types
The following types of material intensity of products are distinguished: absolute, structural and specific. Absolute material consumption shows the consumption rate for one finished product. Structural material intensity characterizes the share of a group of materials in the manufacture of the finished product. Specific material consumption is the structural material consumption reduced to a natural unit of measurement (meters, liters, etc.).
Factor analysis of material consumption
The material intensity of products primarily depends on the cost of production volume and the amount of material costs for its production. The cost of output volume may change due to output volume, product mix and product selling prices. Material costs are also influenced by the volume of production, its structure, material consumption per unit of production and prices for material resources.
Summary
Analysis of material consumption allows us to draw conclusions about the efficiency of using the organization’s reserves in manufacturing finished products. Based on it, it is possible to identify reserves for reducing costs for energy resources, raw materials and supplies. The main purpose of using and calculating the material intensity of products is to save production costs and increase efficiency economic activity enterprises.
Particular indicators of material consumption used to characterize the efficiency of use individual species material resources (raw material intensity, metal intensity, fuel intensity, energy intensity, etc.), as well as to characterize the level of material intensity of individual products.
Specific material consumption can be calculated both in monetary terms (the ratio of the cost of all materials consumed per unit of product to its wholesale price), and in natural or conditionally natural terms (the ratio of the quantity or mass of material resources spent on the production of the 1st type of product to the number of products produced this type).
In the process of analysis, the actual level of material use efficiency indicators is compared with the planned one, their dynamics and reasons for change are studied (Fig. 15.1), as well as the impact on the volume of production.
Material consumption, like material productivity, primarily depends on the volume of product output and the amount of material costs for its production. The volume of gross (commodity) output in value terms (TP) can change due to the amount of products produced ( VB P), its structures (Oudi) and the level of selling prices (CPU). Amount of material costs (MZ) also depends on the volume of products produced, its structure, material consumption per unit of production (UR), cost of materials (CM) and the amount of fixed material costs ( N), which in turn depends on the amount of materials consumed and their cost. As a result, the total consumption of materials depends on the volume of products produced, its structure, rates of material consumption per unit of production, prices for material resources and selling prices for products.
Influence of first order factors on material productivity or material consumption can be determined by the method of chain substitution, using the data in table. 15.5.
Based on the given data on material costs and the cost of marketable products, we will calculate the indicators of material intensity of products, which are necessary to determine the influence of factors on changes in its level (Table 15.6).
The table shows that material consumption as a whole increased by 1.1 kopecks, including due to changes in:
volume of output 29.20 - 29.34 = -0.14 kopecks,
production structure 29.66 - 29.20 = +0.46 kopecks,
specific consumption of raw materials 30.14 - 29.66 == +0.48 kopecks,
prices for raw materials and supplies 31.49 - 30.14 = +1.35 kopecks,
selling prices for products 30.44 - 31.49 = -1.05 kopecks.
Total +1.10 kopecks.
Thus, we can conclude that the enterprise in the reporting year increased the share of products with more high level material consumption (products C and D). There was an overconsumption of materials compared to the approved standards, as a result of which material consumption increased by 0.48 kopecks, or 1.64%. The most significant impact on the increase in the material intensity of products was exerted by the increase in prices for raw materials and supplies due to inflation. Due to this factor, the level of material consumption increased by 1.35 kopecks, or 4.6%. Moreover, the rate of increase in prices for material resources was higher than the rate of increase in prices for the enterprise’s products. Due to the increase in selling prices, material consumption decreased, but not to the same extent as it increased due to the previous factor.
Then it is necessary to analyze the indicators of private material consumption (raw material intensity, fuel intensity, energy intensity) as components of the total material intensity (Table 15.7).
It is also necessary to study the material intensity of certain types of products and the reasons for changes in its level: specific consumption of materials, their cost and selling prices for products.
Table data 15.8 show that products C and D have a higher level of material intensity. However, compared to the plan, it decreased: for product C due to a more economical use of materials, and for product D due to the use of cheaper raw materials. For products A and B, material consumption increased due to excess consumption of materials per unit of production relative to the norm and due to an increase in their cost.
Note: URf, URpl - respectively, actual and planned specific consumption of materials per unit of production; TsMf, TsMpl - actual and planned price levels for material resources; TsPf, TsPpl - actual and planned level of prices for products.
The main attention is paid to studying the reasons for changes in the specific consumption of raw materials per unit of production and searching for reserves for its reduction. The amount of material resources consumed per unit of production may change due to the quality of materials, replacement of one type with another, production equipment and technology, organization of logistics and production, qualifications of workers, changes in consumption rates, waste and losses, etc. These reasons are established by acts on the implementation of measures, notices of changes in cost standards from the implementation of measures, etc.
See also:
7.3. The impact of changes in material consumption on
enterprise performance indicators
Reducing the material consumption of products helps to reduce costs in terms of material costs and increase production volumes. From the definition of material productivity, the formula can be derived:
If material consumption decreases, and material productivity, accordingly, increases, then the additional volume of production, due to more rational use of materials, can be calculated using the formula:
Δ 
,
(7.6)
Where 
- actual volume of material costs; 
- actual and planned material output, respectively.
Based on the definition of material consumption, the following formula can be derived:
(7.7)
And then the change in cost in terms of material costs, as a result of changes in material intensity, is most easily calculated as follows:
Where 
– change in material costs due to changes in the material intensity of products; 
- actual volume of products produced; 
– respectively, the actual and planned material consumption of products.
7.4.Practical tasks
Problem 7.1.
Based on statistical information and internal accounting data, an analytical table was filled out. 7.2. It is necessary to give a general assessment of the implementation of planned targets for the use of materials at the enterprise.
Table 7.2
In fact, compared to the plan, the consumption of material resources and the volume of production increased. To assess the rationality of using materials, we will determine the indicators characterizing their use (Table 7.3).
Table 7.3.
Factor analysis of changes in material intensity of products.
|
Indicators |
According to plan |
Actually |
Deviation, +/- |
Growth rate |
|
1. Output of products at comparable prices excluding VAT, UAH. | ||||
|
2. Material costs, UAH. | ||||
|
3. Of which direct material costs, UAH. | ||||
|
4. Total material intensity of products (page 2:page 1) | ||||
|
5. Material intensity of products by direct material costs (page 3: page 1) | ||||
|
6. Overall material efficiency (page 1: page 2) | ||||
|
7.Material productivity of direct material costs (page 1: page 3) | ||||
|
8. Ratio of all material costs and direct material costs (line 2: line 3) |
As we can see, in the period under review, the planned indicators for the use of materials were not met: material consumption increased, and material productivity, accordingly, increased. The overall increase in material intensity of products actually compared to the plan amounted to 0.014. One of the factors influencing material intensity in accordance with formula 3.1 is material intensity based on direct material costs:
Using the method of chain substitutions (technical simplification - the method of absolute differences), we determine the influence of individual factors (material intensity by direct material costs and the ratio of all and direct material costs) on the change in material intensity:
Influence 
(qualitative factor) 0.046 x 1.105 = 0.051;
Influence 
(quantitative factor) - 0.095 x 0.392 = - 0.037.
Balance of deviations: 0.051 + (- 0.037) = 0.014.
Problem 7.2.
The enterprise produces two types of products - products A and B. Table 7.4 provides information on the consumption rates of direct materials, their prices, and the production volume, respectively, according to plan and actually. It is necessary to conduct analytical research in the following areas:
Determine the specific material consumption of products A and B and the total material consumption of products according to plan and actual.
Analyze changes in the material intensity of products, specifying the influence of individual factors.
Indicate possible reserves for reducing the material consumption of products.
Table 7.4
|
Name of materials |
According to plan |
Actually |
||||||
|
production products, pieces |
Consumption rate materials |
Material unit price, UAH. |
Selling price products, UAH |
production of products, pieces. |
Consumption rate materials per unit, kg |
units of material, UAH. |
Selling price products, UAH |
|
|
Product A | ||||||||
|
1. Hot rolled steel | ||||||||
|
2. Non-ferrous metal | ||||||||
|
Product B | ||||||||
|
1. Hot rolled steel | ||||||||
|
2. Non-ferrous metal | ||||||||
To determine material intensity indicators for direct materials, we calculate planned and actual material costs for each product and for the entire output.
Table 7.5.
Material consumption by direct material costs
|
Product name |
Per unit of production |
Per volume produced |
||||
|
material costs, UAH. |
vacation pay unit price, UAH |
Specific material consumption |
material costs, UAH. |
products, UAH |
Material consumption |
|
|
Product A | ||||||
|
Product B | ||||||
|
For the entire issue | ||||||
|
Actually | ||||||
|
Product A | ||||||
|
Product B | ||||||
|
For the entire issue | ||||||
As we can see, in fact, compared to the plan, the material intensity of production increased by 0.016 (0.334 - 0.318). At the same time, the specific material consumption of product A increased, and B decreased. The change in the material intensity of product A was 0.075 (0.327-0.252).
Using the method of chain substitutions, we will determine the influence of factors on the change in the material intensity of the product.
According to plan (basic calculation) 126: 500=0.252
1st substitution 180: 500=0,36
0.36 – 0.252 = 0.108 - the impact of changes in material costs.
2nd substitution 180: 550=0,327
0.327 – 0.36 = - 0.033 - the impact of changes in product prices.
Balance sheet linkage: 0.108 + (-0.033) = 0.075.
The amount of material costs for a product is also influenced by the rate of material consumption and the price of a unit of material (formula 7.3):
The object of our further analysis is the excess of actual material costs for product A compared to the plan, amounting to 54 UAH. (180-126). Using the method of absolute differences, we will determine the influence of individual factors on the change in the amount of material costs.
Impact of changing material consumption rates:
(7 - 6)·12+(3 - 2)·32=44 (UAH).
Impact of changing the unit price of a material:
(12 - 11) 6+(32 - 30) 2=10 (UAH)
Balance of deviations: 44+10=54 (UAH).
A summary of the results of the analysis of the specific material consumption of product A is given in Table. 7.6.
Table 7.6
Thus, there are reserves for reducing the material consumption of product A by reducing the consumption rates of materials and their prices. For product B, it is also necessary to conduct a factor analysis of changes in material costs, and then proceed to generalize the results of the analysis of the use of materials for the entire enterprise.
Problem 7.3.
Based on the information given in Problem 7.1, determine the impact of changes in the material intensity of products on the cost and volume of production.
Calculation of the influence of factors on changes in costs and production volume is given in Table 7.7.
Table 7.7.
Determining the impact of materials use on
enterprise performance indicators
Problem 7.4.
Based on the information given in task 7.2, determine the impact of changes in the material intensity of products on the performance indicators of the enterprise.
Table 7.8.
Determining the impact of material consumption on indicators
work of the enterprise
|
Indicators |
Deviation |
||
|
Material costs, UAH. | |||
|
Volume of production in value terms, UAH. | |||
|
Material consumption of products based on direct material costs | |||
|
Material productivity of direct material costs | |||
|
Increase (+) or decrease (-) in cost in terms of material costs as a result of changes in material intensity, UAH | |||
|
Increase (+) or decrease (-) in production volume as a result of changes in material productivity, UAH. |
The material intensity indicator is more analytical; it actually reflects the level of use of materials in production. In the process of analysis, the level and dynamics of the indicator of material intensity of products are studied, the reasons for changes in indicators of material intensity and material productivity are determined, and the influence of indicators on the volume of production is determined.
The main analytical indicator characterizing the use of materials in production is:
- - material intensity of all commercial products,
- - material consumption of individual products.
Calculation and analysis of particular indicators of material intensity allows us to identify the structure of material costs, the level of material intensity of certain types of material resources, and establish reserves for reducing the material intensity of products.
An analysis of the structure of material costs is carried out to assess the composition of material resources and the share of each type of resource in the formation of the cost and cost of production. The analysis identifies opportunities for improving the structure of material costs through the use of new advanced types of materials, the use of substitutes (cermets, etc.).
Material consumption analysis is carried out as follows:
- 1. The material consumption of commercial products is calculated according to the plan, according to the report, the deviation is determined, and an assessment of the change is given.
- 2. The change in material intensity for individual cost elements is analyzed.
- 3. The influence of changes in “standard” factors (quantity of consumable materials per unit of production) and prices on the material intensity of products is determined.
- 4. Changes in material consumption are analyzed the most important species products.
- 5. Impact is determined effective use material resources to change the volume of output.
Changes in the material intensity of products are influenced by factors that depend and do not depend on work effort of this enterprise. Changes in the material intensity of all products and individual products can be caused by various factors. The material intensity of all commercial products depends on:
- - changes in the structure and range of products;
- - changes in prices and tariffs for material resources;
- - changes in the material consumption of individual products (specific consumption of raw materials);
- - changes in prices for finished products.
The methodology for analyzing certain types of raw materials and materials in various sectors of the economy is determined by the specifics of the organization and production technology, the types of materials used, and available sources of information.
In the process of analysis, the actual level of efficiency indicators for the use of materials is compared with the planned one, their dynamics and reasons for change are studied, as well as the impact on the volume of production.
Material consumption, like material productivity, primarily depends on the volume of product output and the amount of material costs for its production. The volume of gross (commodity) output in value terms (VP) can change due to the quantity of products produced (VVP), its structure (Ud i) and the level of selling prices (SP). The amount of material costs (MC) also depends on the volume of products produced, its structure, consumption of materials per unit of production (UR), cost of materials (CM). As a result, the total consumption of materials depends on the volume of products produced, its structure, rates of material consumption per unit of production, prices for material resources and selling prices for products.
The influence of first-order factors on material consumption can be determined by the method of chain substitutions (Table No. 5).
Then it is necessary to analyze the indicators of private material intensity (raw material intensity, fuel intensity, energy intensity) as components of the total material intensity (Table No. 9).
Subsequent analysis should be aimed at studying the reasons for changes in the consumption of material resources per unit of production and prices for raw materials.
The amount of material resources consumed per unit of production may change due to the quality of materials, replacement of one type with another, equipment and production technology, qualifications of workers, changes in consumption rates, waste and losses, etc. These reasons are established by acts on the implementation of measures, notices of changes in cost standards from the implementation of measures, etc.
The cost of raw materials also depends on their quality, intragroup structure, markets for raw materials, rising prices due to inflation, transportation and procurement costs, etc.
Knowing the factors of changes in the cost and consumption of material resources per unit of production, we can determine their influence on the level of material intensity as follows:
Ме Хi = ?МЗ Хi: VP pl,
where?Ме Хi, ?МЗ Хi are the absolute increase in material intensity and material costs, respectively, due to the i-th factor;
VP is the volume of gross (commodity) output in value terms.
Analysis of the effective use of material resources in production is determined by comparing the actual percentage beneficial use material resources to planned according to the formula:
MZ = (MZ f: MZ pl) x 100%,
where MZ f, MZ pl are actual and planned material costs.
A decrease in this indicator indicates inefficient use of material resources.
An increase in material consumption may be caused by a violation of technology and recipes; imperfect organization of production and logistics; low quality of raw materials; replacing one type of material with another.
Products are the ratio of the amount of material costs to the cost of manufactured products. Essence and meaning material intensity: shows how much material costs need to be produced or actually account for the production of a unit of product.
Where MZ is the amount of material costs; VP - volume of products (works, services).
Purpose of the service. Using an online calculator, a factor analysis of material intensity is carried out using the following factors:
- volume of production;
- production structures;
- specific consumption of raw materials;
- prices for raw materials and supplies;
- selling prices for products.
Instructions. Fill in the required information, click Next. The solution is saved in MS Word format.
Example. As noted above, the total consumption of materials depends on the volume of production and the amount of material costs for its production. In turn, the volume of product output in value terms (VP) is influenced by factors such as the quantity of products produced (VVP), its structure (UDi) and the level of selling prices (SP). The amount of material costs (MC) also depends on the volume of products produced, its structure, consumption of materials per unit of production (UR), cost of materials (CM).
The influence of these factors on material consumption can be determined by chain substitution using the data in Table. 1.
| Index | Calculation algorithm | Amount thousand rubles |
| I. Material costs for production: | ||
| a) according to plan | ∑(VVP iPL UR iPL CM iPL) | 35000 |
| b) according to the plan, recalculated to actual production while maintaining the planned structure | MZ PL VP 1 /VP 0 | 33350 |
| c) according to planned standards and planned prices for actual production | ∑(VVP iF UR iPL CM iPL) | 39050 |
| d) actually at planned prices | ∑(VVP iF UR iF CM iPL) | 37600 |
| e) actually | ∑(VVP iF UR iF CM iF) | 45600 |
| II. Cost of gross output: | ||
| a) according to plan | ∑(VVP iPL CPU iPL) | 80000 |
| b) actually with a planned structure and planned prices | ∑(VVP iF CPU iPL) ± ∆VP STR | 76000 |
| c) actually with the actual structure and at planned prices | ∑(VVP iF CPU iPL) | 83600 |
| d) actually | ∑(VVP iF CPU iF) | 100320 |
Table 2 - Factor analysis of material intensity of products.
| Index | Volume of production | Product structure | Material consumption per product | Material prices | Product prices | Calculation of material consumption | Material consumption level, kopecks |
| Plan: ME 0 | Plan | Plan | Plan | Plan | Plan | 35000: 80000 | 43.75 |
| ME conv1 | Fact | Plan | Plan | Plan | Plan | 33350: 76000 | 43.882 |
| ME conv2 | Fact | Fact | Plan | Plan | Plan | 39050: 83600 | 46.711 |
| ME conv3 | Fact | Fact | fact | Plan | Plan | 37600: 83600 | 44.976 |
| ME conv4 | Fact | Fact | Fact | Fact | Plan | 45600: 83600 | 54.545 |
| Fact: ME 1 | Fact | Fact | Fact | Fact | Fact | 45600: 100320 | 45.455 |
volume of production: 43.882 - 43.75 = 0.132 kopecks.
production structure: 46.711 - 43.882 = 2.829 kopecks.
specific consumption of raw materials: 44.976 - 46.711 = -1.734 kopecks.
prices for raw materials: 54.545 - 44.976 = 9.569 kopecks.
selling prices for products: 45.455 - 54.545 = -9.091 kopecks.
Thus, we can conclude that the enterprise in the reporting year increased the share of products with a higher level of material intensity.
As a result of the impact of this factor, the amount of material costs in the cost of production increased by 2838 thousand rubles (0.0283 * 100320)
Some savings in materials were achieved in comparison with the approved standards, as a result of which material consumption decreased by 1,734 kopecks.
Under the influence of this factor, the amount of material costs in the cost of production decreased by 1,740 thousand rubles (-0.0173 * 100320)
The most significant impact on the increase in the material intensity of products was exerted by the increase in prices for raw materials and supplies due to inflation.
The increase in production volume due to changes in the total amount of material costs can be determined using the following formula:
∆VP = (MZ 1 - MZ 0 / ME 0)
The effect of changes in the efficiency of use of material resources on the increase in production volume can be calculated using the following formula:
∆VP = MZ 1 (1 / IU 1 - 1 / IU 0)
Table 3 - Analysis of material consumption of products. Change in production volume by 20,320 thousand rubles. was caused by:
- changes in the total amount of material costs: 10600 / 0.438 = 24228.571 thousand rubles.
- changes in the efficiency of use of material resources: 45600 (1 / 0.455 - 1 / 0.438) = -3908.571 thousand rubles.