Types of production costs. What applies to them? Average variable costs

No activity is possible without costs. Costs are one of the indicators of the efficiency and intensity of resource consumption. The profitability of the organization depends on their size. One of the requirements for managers commercial enterprises, is rational use resources. To achieve this goal, it is necessary to be able to calculate, analyze and optimize the company's costs. You will learn how to do this correctly from our article.

Definition

Costs are the costs of producing, transporting and storing goods. Their value depends on the prices of consumed resources. Stocks of the latter are limited. Using some resources means abandoning others. From this we can conclude that all costs of the company are alternative in nature. For example, steel used in automobile manufacturing is lost to machine tools. And the labor costs of a mechanic are equivalent to his contribution to the production of, for example, refrigerators.

Types of expenses

External (monetary) costs are the company's costs for production factors (wages, purchase of raw materials, social needs, rent of premises, etc.). The purpose of these payments is to attract a certain amount of resources. This will lead to them being distracted from alternative use cases. Such expenses are also called accounting expenses.

Internal (implicit) costs are the costs of the company's own resources ( cash, equipment, etc.). That is, if an organization is located in premises that it owns, then it loses the opportunity to rent it out and receive income from it. Although internal costs are hidden and are not reflected in accounting, they must still be taken into account when making management decisions.

The second type of cost also includes “normal profit” - the minimum income that an entrepreneur must receive in order to be able to continue to engage in this business. It must be no less than the remuneration from alternative type activities.

Business costs include:

• accounting expenses;
• normal profit;
• customs duties, if any.

Alternative classification

Implicit costs are hidden, but they still need to be taken into account. The situation is different with sunk costs: they are visible, but they are always ignored. These are expenses that were made in the past and cannot be changed in the present. An example of such costs is the purchase of custom-made machinery that can be used to produce one type of product. The cost of manufacturing such a machine is considered a sunk cost. The opportunity cost in this case is zero. TO this species also includes R&D, marketing research etc. There are also preventable costs, that is, those that can be prevented: “promotion” of a new product in the media, etc.

Since the magnitude of external and internal costs does not coincide, there are differences in the volumes of accounting and economic profits. The first represents sales revenue minus explicit cash costs. Economic profit is the difference between sales revenue and all costs.

Types of costs in the short term

In the short term, all costs are divided into fixed and variable. It is important to distinguish between total costs for the entire volume of production and per unit - average costs. Let's look at each type in detail.

Fixed (FC) costs do not depend on the volume of manufactured products (Q) and appear before the start of production: equipment depreciation, security salaries, etc. They are also called the costs of creating operating conditions. That is, if production volume decreases by 20%, the amount of such costs will not change.

Variable (VC) costs change depending on the workload of production: materials, workers' salaries, transportation, etc. For example, metal costs in a pipe rolling plant will increase by 5% with an increase in pipe production volumes by 5%. That is, changes occur proportionally.

Total costs: TC = FC + VC.

The amount of fixed and variable costs changes with the growth of production volume, but not equally. In the early stages of an organization's development, they grow rapidly. As production volumes increase, their pace slows down.

Average costs

Specific fixed (AFC) and variable (AVC) costs are also calculated per unit of output:

With increasing production rates fixed costs are distributed over the entire volume, and AFC are reduced. But variable unit costs first decrease to a minimum, and then, under the influence of the law of diminishing returns, begin to increase. Total costs are also calculated per unit of production:

Unit total costs change in a similar way. While average constants (AFC) and average variables (AVC) decrease, ATC also decreases. And with increasing production, these values ​​also increase.

Additional classification

For the purposes of economic analysis, an indicator such as marginal cost (MC) is used. It represents the increase in costs for the production of an additional unit of the product:

MC = A TCn - A TCn-l.

Marginal cost determines how much a firm will pay to increase its output by one unit. The organization can influence the amount of these costs.

It is important to be able to calculate all the types of costs considered.

Data processing

Cost analysis shows:

• when M.C.< AVC + ATC, изготовление дополнительной единицы продукции снижает удельные переменные и общие затраты;
• when MC > AVC + ATC, producing an additional unit increases average variable and total costs;
• when MC = AVC + ATC, unit variables and total costs are minimal.

Long-term cost calculation

The costs discussed above related to decisions that need to be made immediately. For example, to determine how much production of goods that will be sold at a discount can be increased. In the long term, an organization can change all factors of production, that is, all costs become variable. But if the enterprise reaches a volume at which ATC increases, then it is necessary to adjust the constant factors of production.

Based on the ratio of the rate of change in production costs and production volume, the following are distinguished:

• positive returns - production growth rates are higher than total costs. Unit costs are reduced;
• Diminishing returns - costs increase faster than production. Unit costs are increasing;
• constant return - the growth rates of production and expenses approximately coincide.

Positive returns to scale are due to the fact that:

• specialization of labor large production reduces costs;
• it is possible to use waste from the main production to produce additional products.

The negative effect is caused by an increase in management costs and a decrease in the efficiency of interaction between departments.

While the positive effect dominates, the average long term costs decrease, in the opposite situation they increase, and when they are equal, the costs practically do not change.

Pricing

Production costs are the expenditure of all factors of production expressed in monetary terms. This is a very important indicator that is used to calculate the price. Costs and profits are closely related. Therefore, the main goal of cost analysis is to identify the optimal relationship between these indicators.

Classification of expenses makes economic sense and is used in practice to solve the following problems:

• assessment of the organization's competitiveness;
• regulating profit growth by reducing certain categories of expenses;
• definitions of “margin of financial strength”;
• calculating product prices through marginal costs.

To maintain optimal pricing policy in the market, it is necessary to constantly analyze the level of costs. For this purpose, it is customary to calculate gross costs (AC) per unit of item. The curve of these costs on the graph has a U-shape. At the first stages, costs are high, since large fixed costs are distributed over a small volume of items. As the AVC rate increases per unit, costs decrease and reach their minimum. When the law of diminishing returns begins to operate, that is, the level of costs is more influenced by variable costs, the curve will begin to move upward. Firms with different scales, levels of scientific and technical progress, and volumes of costs simultaneously operate in the same industry. Therefore, a comparison of average costs allows us to assess the organization’s position in the market.

Example

Let's calculate different kinds costs and their changes using the example of a closed joint stock company.

The table shows that the largest share falls on other expenses. In 2012, their share decreased by 0.8%. At the same time, there was a decrease in material costs by 1%. But the share of wage payments increased by 1.3%. The least expenses are for depreciation and social contributions.

The large share of other costs can be explained by the specifics of the enterprise's activities. This category includes payment for various services to third parties which is associated with the sale of goods: reception, storage, transportation of raw materials, etc.

Now let's look at the impact of turnover on costs. To do this, it is necessary to calculate the absolute value of deviations, divide them into constants and variables, and then analyze the dynamics.

A reduction in trade turnover by 31.9% led to a reduction in distribution costs by 18 thousand rubles. But these same costs in relation to trade turnover increased by 5.18%. The following table shows how production volume affects the largest cost items.

Decrease in trade turnover by 220 million rubles. led to a reduction in variable costs by an average of 1%. At the same time, almost all cost items in absolute terms decreased by 4-7 thousand rubles. In total, overexpenditure was received in the amount of 22.9 million rubles.

How to reduce costs

Reducing costs requires capital, labor and finance. This step is justified when it increases beneficial effect from the product or the price decreases in competition.

Cost reduction is affected by changes:

• trade turnover structures;
• time of circulation of goods;
• prices for goods;
• labor productivity;
• efficiency of operation of the material and technical base;
• level of scientific and technical progress at the enterprise;
• conditions of implementation.

Ways to increase the level of scientific and technical progress:

• full use production capacity(economical consumption of materials and fuel);
• creation of new machines, equipment and technologies.

The development of resource-saving technologies in Russia has been going on for 20 years. But with development market relations implementation of scientific and technological progress developments on industrial enterprises slowed down. Therefore, in the current conditions, it is more appropriate to optimize labor productivity. Expert calculations have shown that its growth depends by 40% on the improvement of technology and 60% on the human factor.

It is very important to correctly determine methods for encouraging staff. E. Mayo believed that any motivation is based on the satisfaction of social needs. During experiments conducted in 1924-1936. at the Western Electric plant in Illinois, a sociologist was able to prove that informal relationships between employees have higher value than working conditions or financial incentives. Modern researchers argue that in itself social significance very important for a person. If it is complemented by the opportunity to help people, to be useful, then productivity increases without material costs. This area of ​​incentives is especially important for employees who work according to their calling. But this does not mean that the competitive level wages doesn't matter. Wages should increase with increasing production efficiency.

Summary

Costs and profits are closely related. It is impossible to generate income without expending capital, human or material resources. In order to increase profit levels, costs must be correctly calculated and analyzed. There are many different classifications, but the most important of them is the division of costs into fixed and variable. The former do not depend on the volume of output and exist to ensure working conditions. The latter change in proportion to the rate of production growth.

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

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

Production costs and their types

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

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

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

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

Explicit and implicit costs

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

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

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

Other types of costs

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

In a narrow sense, sunk costs represent the costs of those types of resources that have no alternative use. If the equipment cannot be used alternatively, then we can say that its opportunity costs are zero.

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

Fixed and variable costs

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

It can be said that fixed costs do not depend on how many products the enterprise produces in the short term. This could be depreciation, interest payments on bonds, lease payments insurance payments, salaries of management personnel. Variable costs depend on the volume of output, and includes costs for variable production factors (transport costs, utility bills, payment for raw materials, etc.).

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

What are production costs

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

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

Explicit and implicit costs

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

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

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

Methods for calculating costs

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

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

Classification of production costs

There are the following types of production costs:

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

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

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

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

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

4. Average variable costs (AVC) - the amount of variable costs that an enterprise incurs to produce a unit of goods. This indicator can be calculated by dividing total variable costs by the volume of goods produced:

• SPRI = PR: O.

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

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

• OI = PI + Pri.

That is, you need to look for the reasons for the high indicator of total costs in its components.

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

• SOI = OI: O = (PI + PrI): O.

The last two indicators increase as production volumes increase.

Types of variable expenses

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

Therefore, there are several types of variable costs:

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

Costs in the short term

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

Costs in the long run

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

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

Average costs in the long run

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

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

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

Any business involves costs. If they are not there, then there is no product supplied to the market. To produce something, you need to spend money on something. Of course, the lower the costs, the more profitable the business.

However, following this simple rule requires the entrepreneur to take into account a large number of nuances reflecting the variety of factors influencing the success of the company. What are the most noteworthy aspects that reveal the nature and types of production costs? What does business efficiency depend on?

A little theory

Production costs, according to a common interpretation among Russian economists, are the costs of an enterprise associated with the acquisition of so-called “factors of production” (resources without which a product cannot be produced). The lower they are, the more economically profitable the business is.

Production costs are measured, as a rule, in relation to the total costs of the enterprise. In particular, a separate class of expenses may include those associated with the sale of manufactured products. However, everything depends on the methodology used in classifying costs. What are the options here? Among the most common in the Russian marketing school are two: the “accounting” type methodology, and the one called “economic”.

According to the first approach, production costs are the total set of all actual expenses associated with the business (purchase of raw materials, rental of premises, payment of utilities, personnel compensation, etc.). The “economic” methodology also involves the inclusion of those costs, the value of which is directly related to the company’s lost profit.

In accordance with popular theories adhered to by Russian marketers, production costs are divided into fixed and variable. Those that belong to the first type, as a rule, do not change (if we talk about short-term time periods) depending on the growth or reduction in the rate of production of goods.

Fixed costs

Fixed production costs are, most often, such expense items as rent of premises, remuneration of administrative personnel (managers, executives), obligations to pay certain types of contributions to social funds. If they are presented in the form of a graph, it will be a curve that is directly dependent on the volume of production.

As a rule, enterprise economists calculate average production costs from those that are considered constant. They are calculated based on the volume of costs per unit of manufactured goods. Typically, as the volume of goods produced increases, the average cost “schedule” decreases. That is, as a rule, the greater the productivity of the factory, the cheaper the unit product.

Variable costs

The enterprise's production costs related to variables, in turn, are very susceptible to changes in the volume of output. These include the costs of purchasing raw materials, paying for electricity, and compensating personnel at the specialist level. This is understandable: more material is required, energy is wasted, new personnel are needed. A graph showing the dynamics of variable costs is usually not constant. If a company is just starting to produce something, then these costs usually grow more rapidly in comparison with the rate of increase in production.

But as soon as the factory reaches a sufficiently intensive turnover, then variable costs, as a rule, do not grow so actively. As with fixed costs, an average is often calculated for the second type of cost - again, in relation to unit output. The combination of fixed and variable costs is the total cost of production. Usually they are simply added together mathematically when analyzing a company's economic performance.

Costs and depreciation

Phenomena such as depreciation and the closely related term “wear and tear” are directly related to production costs. By what mechanisms?

First, let's define what wear is. This, according to the interpretation widespread among Russian economists, is a decrease in the value of production resources. Wear and tear can be physical (when, for example, a machine or other equipment simply breaks down or cannot withstand the previous rate of production of goods), or moral (if the means of production used by the enterprise, say, are much inferior in efficiency to those used in competing factories ).

A number of modern economists agree that obsolescence is a constant cost of production. Physical - variables. The costs associated with maintaining production volumes of goods subject to wear and tear of equipment form the same depreciation charges.

As a rule, this is associated with the purchase of new equipment or investments in the repair of current equipment. Sometimes - with change technological processes(for example, if a machine producing spokes for wheels breaks down at a bicycle factory, their production may be outsourced temporarily or on an indefinite basis, which, as a rule, increases the cost of producing finished products).

Thus, timely modernization and purchase of high-quality equipment is a factor that significantly influences the reduction of production costs. Newer and modern technology in many cases involves lower depreciation costs. Sometimes the costs associated with equipment wear and tear are also influenced by the qualifications of the personnel.

As a rule, more experienced craftsmen handle equipment more carefully than beginners, and therefore it may make sense to spend money on inviting expensive, highly qualified specialists (or invest in training young ones). These costs may be lower than investments in depreciation of equipment subject to intensive use by inexperienced beginners.

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

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

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

Concept and classification of costs

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

To model economic situations, create formulas, evaluate business processes and their results, costs must be classified, i.e. divided according to certain characteristics and combined into typical groups. There is no rigid classification system; it is more convenient to consider costs based on the needs of a particular study. But some frequently used options can be considered a kind of rules.

Especially often costs are divided into:

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

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

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

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

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

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

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

According to costing items, costs are divided into:

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

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

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

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

Methods for calculating costs

Formulas and graphs

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

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

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

Total costs = fixed costs + variable costs;

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

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

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

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