Does it make sense to divide costs into fixed and variable? Variable cost formula

6.1. Theoretical introduction

As part of the provision financial stability Enterprises pay great attention to cost management. Based on the type of dependence of the expense item on the volume of production, costs can be divided into two categories - permanent And variables. Variable expenses ( V.C.) depend on the volume of production (for example, raw materials, piecework wages, fuel and electricity for production machines). As a rule, variable costs increase in proportion to the growth of production volumes, i.e. magnitude variable expenses per unit of production (v) remains constant

where VC is the sum of variable costs,

Q – production volume.

Fixed expenses ( FC) do not depend on production volume (for example, staff salaries, accrued depreciation, etc.). This category also includes fixed costs, which, with a significant increase in production volumes, change in steps, i.e. expenses that can be classified as semi-fixed (for example, when output increases above a certain level, a new warehouse is required). Fixed costs per unit (f) decrease as production volume increases

Depending on the attribution of the cost item to a specific type of product, costs are divided into direct (related to the production of a specific type of product) and indirect (not related to the production of a specific product). The division of costs into direct and indirect is used when studying the impact of the release (or refusal to release) of a particular type of product on the amount and structure of costs. Practice shows that for most enterprises, direct and variable costs coincide to a first approximation. The accuracy of matching direct and variable costs in many cases is at least 5%. In a preliminary analysis that identifies the main cost components, this accuracy is sufficient.

Classification of costs into variable and constant is necessary to calculate the break-even point, profitability threshold and margin of financial safety.

Break even characterizes the critical volume of production in in kind, A profitability threshold– in terms of value. Calculation of parameters is based on calculation of gross income

where GI is gross income;

S – sales in value terms;

P – product price.

The break-even point (Q without) is the volume of output at which gross income is zero. From equation (6.3)

. (6.4)

The profitability threshold (Sr) is the volume of sales revenue that reimburses production costs, but the profit is zero. The profitability threshold is calculated using the formula

The difference between sales in value terms and variable costs determines marginal income (MS)

. (6.6)

Marginal income per unit of production With equal to the additional gross income that the enterprise will receive as a result of the sale of an additional unit of production

. (6.7)

As can be seen from (6.6) and (6.7), marginal income does not depend on the level of semi-fixed expenses, but increases when variables are reduced.

The difference between sales revenue and the profitability threshold is financial safety margin(ZFP). FFP is the amount by which the volume of production and sales deviates from the critical volume. FFP can be characterized by relative and absolute indicators.

In absolute terms, the FFP is equal to

, (6.8)

In relative terms, the FFP is equal to

(6.9)

Where Q– current output volume.

The FFP shows by what percentage the sales volume can be changed without falling into the loss zone. The greater the margin of financial strength, the less business risk.

A key characteristic in the cost management process is the level of additional costs associated with cost reduction items. Cost management comes down to identifying controllable items (for which adjustments are possible as a result of certain activities), determining the amount of cost reduction (in%) and one-time expenses for the relevant activities. Those activities for which the effectiveness indicator (e) is maximum are considered acceptable. .

, (6.10)

where ΔGI is the relative change in gross income as a result of

cost reduction;

GI 0 – level of gross income before cost reduction;

GI 1 – level of gross income of cost reduction;

Z – one-time costs for reduction measures

Relationship between changes in profit and expenses:

, (6.11)

Where Cx- some expense item,

Ref- all other expenses.

The following formula shows by what percentage gross income will change when expenses change Cx by 1%:

. (6.12)

Formula (6.12) is valid for a situation where the volume of revenue and the amount of other expenses are fixed.

Problem 1. The company produces the carbonated drink "Baikal". Variable costs per unit of production are 10 rubles, fixed costs are 15,000 rubles. Sale price 15 rub. What quantity of drink must be sold to obtain a gross income of 20,000 rubles.

Solution.

1. Determine marginal income (rub.) using formula (6.7):

2. Using (6.3), we determine the quantity of products (units) that must be sold to obtain GI in the amount of 20,000 rubles.

Task 2. The price of the product is 4 rubles. at the level of variable costs – 1 rub. The volume of fixed costs is 14 rubles. Production volume – 50 units. Determine the break-even point, profitability threshold and margin of financial strength.

Solution.

1. Determine the production volume at the break-even point:

(units).

2. According to formula (4.5), the profitability threshold (RUB) is equal to:

3. The absolute value of the financial safety margin:

4. Relative value of the financial safety margin:

An enterprise can change its sales volume by 90% without incurring losses.

6.3. Tasks for independent work

Task 1. Variable costs for producing a unit of product are 5 rubles. Fixed monthly costs 1,000 rubles. Determine the break-even point and marginal profit at the break-even point if the price of the product on the market is 7 rubles. Determine the margin of financial safety at a volume of 700 units.

Problem 2. Sales revenue – 75,000 rubles, variable costs – 50,000 rubles. for the entire production volume, fixed costs amounted to 15,000 rubles, gross income - 10,000 rubles. The volume of production is 5,000 units. Unit price – 15 rubles. Find the break-even point and profitability threshold.

Task 3. The company sells products with a given demand curve. The cost per unit of production is 3 rubles.

What will be the price and contribution margin, provided that the company's goal is to maximize profits from sales.

Task 4. The company produces two types of products. Determine the profit and marginal income from the main and additional orders. Fixed costs – 600 rub.

Task 5. The aircraft factory's break-even point is 9 aircraft per year. The price of each aircraft is 80 million rubles. Marginal profit at the break-even point is RUB 360 million. Determine how much the aircraft factory spends per month on expenses not directly related to production?

Task 6. A skate seller conducts market research. The population of the city is 50 thousand people, age distribution:

For 30% of schoolchildren, parents are ready to purchase skates. The company decides to enter the market if the resulting marginal profit is sufficient to cover expenses in the amount of 45,000 rubles. with variable costs of 60 rubles. What should the price be to maximize contribution margin?

Task 7. The company expects to sell 1,300 sets of furniture. The costs for 1 set are 10,500 rubles, including variable costs of 9,000 rubles. Selling price 14,500 rub. How much volume must be sold to achieve break-even production? What is the volume that ensures production profitability of 35%. What will be the profit if sales increase by 17%? What should the price of the kit be in order to make a profit of 1 million rubles by selling 500 products?

Task 8. The operation of the enterprise is characterized by the following indicators: sales revenue 340 thousand rubles, variable expenses 190 thousand rubles, gross income 50 thousand rubles. The company is looking for ways to increase gross income. There are options for reducing variable costs by 1% (the cost of the event is 4 thousand rubles), or alternative measures to increase sales volume by 1% (one-time expenses in the amount of 5 thousand rubles). What activities should funds be allocated to first? Draw a conclusion based on the effectiveness of the measures.

Problem 9. As a result of the implementation of a comprehensive program at the enterprise, the cost structure has changed, namely:

The value of variable costs increased by 20%, while maintaining the value of constant costs at the same level;

15 % fixed costs transferred to the category of variables, keeping the total amount of costs at the same level;

Total costs were reduced by 23%, including by 7% due to variables.

How did the changes affect the break-even point and the profit margin if the price was 18 rubles? Production volume and costs are given in the table.

Problem 10. The results of the analysis of the cost structure and opportunities for cost reduction are shown in the table.

Determine the final cost reduction (in %) and select from the proposed expense items the one you should pay attention to first.

In the activities of any enterprise, making the right management decisions is based on an analysis of its performance indicators. One of the objectives of such analysis is to reduce production costs, and, consequently, increase business profitability.

Fixed and variable costs and their accounting are an integral part of not only calculating product costs, but also analyzing the success of the enterprise as a whole.

Correct analysis of these articles allows you to take effective management decisions that have a significant impact on profits. For analysis purposes, in computer programs at enterprises, it is convenient to provide for the automatic breakdown of costs into fixed and variable costs based on primary documents, in accordance with the principle adopted in the organization. This information is very important for determining the “break-even point” of a business, as well as assessing profitability various types products.

Variable costs

TO variable costs include costs that are constant per unit of production, but their total amount proportional to the volume of production. These include the costs of raw materials, consumables, energy resources involved in the main production, salaries of the main production personnel (together with accruals) and the cost of transport services. These costs are directly included in the cost of production. In monetary terms, variable costs change when the price of goods or services changes. Specific variable costs, for example, for raw materials in physical dimension, can be reduced with an increase in production volumes due, for example, to a reduction in losses or costs for energy resources and transport.

Variable costs can be direct or indirect. If, for example, an enterprise produces bread, then the costs of flour are direct variable costs, which increase in direct proportion to the volume of bread production. Direct variable costs may decrease with the improvement of the technological process and the introduction of new technologies. However, if a plant processes oil and as a result produces, for example, gasoline, ethylene and fuel oil in one technological process, then the cost of oil for the production of ethylene will be variable, but indirect. Indirect variable costs in this case, they are usually taken into account in proportion to the physical volumes of production. So, for example, if when processing 100 tons of oil, 50 tons of gasoline, 20 tons of fuel oil and 20 tons of ethylene are obtained (10 tons are losses or waste), then the cost of producing one ton of ethylene is 1.111 tons of oil (20 tons of ethylene + 2.22 tons of waste /20 t ethylene). This is due to the fact that, when calculated proportionally, 20 tons of ethylene produce 2.22 tons of waste. But sometimes all waste is attributed to one product. Data from technological regulations are used for calculations, and actual results for the previous period are used for analysis.

The division into direct and indirect variable costs is arbitrary and depends on the nature of the business.

Thus, the cost of gasoline for transporting raw materials during oil refining is indirect, and for transport company direct, since they are directly proportional to the volume of transportation. Wages of production personnel with accruals are classified as variable costs when piecework payment labor. However, with time-based wages, these costs are conditionally variable. When calculating the cost of production, planned costs per unit of production are used, and when analyzing actual costs, which may differ from planned costs, both upward and downward. Depreciation of fixed assets of production per unit of production volume is also a variable cost. But this relative value is used only when calculating the cost of various types of products, since depreciation charges, in themselves, are fixed costs/expenses.

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Thus, total variable expenses can be calculated using the formula:

Rperem = C + ZPP + E + TR + X,

C – costs of raw materials;

ZPP – salary of production personnel with deductions;

E – cost of energy resources;

TR – transport costs;

X – other variable expenses that depend on the company’s activity profile.

If an enterprise produces several types of products in quantities W1 ... Wn and per unit of production variable costs are P1 ... Pn, then the total variable costs will be:

Rvari = W1P1 + W2P2 + … + WnPn

If an organization provides services and pays agents (for example, sales agents) as a percentage of sales volume, then remuneration to agents is considered a variable cost.

Fixed costs

Fixed production costs of an enterprise are those that do not change in proportion to the volume of production.

The share of fixed costs decreases with increasing production volume (scaling effect).

This effect is not inversely proportional to production volume. For example, an increase in production volume may require an increase in the number of accounting and sales departments. Therefore, they often talk about conditionally fixed costs. Fixed costs also include expenses for management personnel, maintenance of key production personnel (cleaning, security, laundry, etc.), organization of production (communications, advertising, bank expenses, travel expenses, etc.), as well as depreciation charges. Fixed expenses are expenses, for example, for renting premises, and the rental price may change due to changes market conditions. Fixed costs include some taxes. These are, for example, the unified tax on imputed income (UTII) and property tax. The amounts of these taxes may change due to changes in the rates of such taxes. The amount of fixed costs can be calculated using the formula:

Рpost = Zaup + AR + AM + N + OR

Variable and fixed costs are the two main types of costs. Each of them is determined depending on whether the resulting costs change in response to fluctuations in the selected cost type.

Variable costs- these are costs, the size of which changes in proportion to changes in the volume of production. Variable costs include: raw materials and supplies, wages of production workers, purchased products and semi-finished products, fuel and electricity for production needs, etc. In addition to direct production costs, some types of indirect costs are considered variable, such as: costs of tools, auxiliary materials, etc. Per unit of output, variable costs remain constant despite changes in production volume.

Example: With a production volume of 1000 rubles. with a cost per unit of production of 10 rubles, variable costs amounted to 300 rubles, that is, based on the cost of a unit of production they amounted to 6 rubles. (300 rub. / 100 pcs. = 3 rub.). As a result of doubling production volume, variable costs increased to 600 rubles, but based on the cost of a unit of production they still amount to 6 rubles. (600 rub. / 200 pcs. = 3 rub.).

Fixed costs- costs, the value of which almost does not depend on changes in the volume of production. Fixed costs include: salaries of management personnel, communication services, depreciation of fixed assets, rental payments, etc. Per unit of production, fixed costs change in parallel with changes in production volume.

Example: With a production volume of 1000 rubles. with a cost per unit of production of 10 rubles, fixed costs amounted to 200 rubles, that is, based on the cost of a unit of production they amounted to 2 rubles. (200 rub. / 100 pcs. = 2 rub.). As a result of doubling production volume, fixed costs remained at the same level, but based on the cost of a unit of production they now amount to 1 rub. (2000 rub. / 200 pcs. = 1 rub.).

At the same time, while remaining independent of changes in production volume, fixed costs can change under the influence of other (often external) factors, such as rising prices, etc. However, such changes usually do not have a noticeable impact on the amount of general business expenses, therefore, when planning, in accounting and control, general business expenses are accepted as constant. It should also be noted that some of the general expenses may still vary depending on the volume of production. Thus, as a result of an increase in production volume, it may increase wage managers, their technical equipment(corporate communications, transport, etc.).

The sum of variable and fixed costs forms the cost of products (works, services).

The dependence of variable and fixed costs on production volume per output and per unit of output is shown in Fig. 10.2.

Fig. 10.2. Dependence of production costs on the number of products produced

The above figure clearly shows that fixed costs per unit products decrease as production volume increases. This indicates that one of the most effective ways to reduce the cost of products is to utilize production capacity as fully as possible.

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Fixed costs do not depend on the dynamics of production volume and sales of products, that is, they do not change when production volume changes.

One part of them is related to the production capacity of the enterprise (depreciation, rent, wages of management personnel on a time basis and general business expenses), the other - with the management and organization of production and sales of products (costs of research papers, advertising, to improve the skills of employees, etc.). You can also identify individual fixed costs for each type of product and common ones for the enterprise as a whole.

However, fixed costs calculated per unit of output change as production volume changes.

Variable costs depend on volume and change in direct proportion to changes in production volume (or business activity) companies. As it increases, variable costs also increase, and vice versa, they decrease as it decreases (for example, the wages of production workers producing a certain type of product, the cost of raw materials and materials). In turn, as part of variable costs allocate costs proportional and disproportionate . Proportional costs vary in direct proportion to production volume. These include mainly the costs of raw materials, basic materials, components, as well as piecework wages of workers. Disproportional costs are not directly proportional to production volume. They are divided into progressive and degressive.

Progressive costs increase more than production volume. They arise when an increase in production volume requires large costs per unit of production (costs of piecework-progressive wages, additional advertising and trade costs). The growth of degrading costs lags behind the increase in production volume. The degressive costs are usually the costs of operating machinery and equipment, various tools (accessories), etc.

In Fig. 16.3. graphically shows the dynamics of total fixed and variable costs.

Dynamics of costs per unit of production looks different. It is easy to build based on certain patterns. In particular, variable proportional costs per unit remain the same regardless of production volume. On the graph, the line of these costs will be parallel to the x-axis. Fixed costs per unit of production decrease along a parabolic curve as its total volume increases. For regressing and progressive costs, the same dynamics remain, only more pronounced.

Variable costs calculated per unit of production are a constant value under given production conditions.

Name it more accurately permanent and variable costs are conditionally constant and conditionally variable. The addition of the word conditional means that variable costs per unit of output can decrease as technology changes at higher output levels.

Fixed costs can change abruptly with a significant increase in output. At the same time, with a significant increase in product output, the technology of its production changes, which leads to a change in the proportional relationship between the change in the quantity of products and the value of variable costs (the angle of inclination on the graph decreases).

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Figure Total costs of the enterprise

Cost of all products calculated as follows:

C - total cost, rub.; a - variable costs per unit of production, rub; N - production volume, pcs; b - fixed costs for the entire volume of production.

Cost calculation units of production:

C unit = a + b/N

With more complete utilization of production capacity, the cost per unit of production decreases. The same thing happens with a significant increase in the scale of output, when variable and fixed costs per unit of output simultaneously decrease.

Analyzing the composition of fixed and variable costs, we derived the following relationship: an increase in revenue will lead to a significantly greater increase in profit if fixed costs remain unchanged.

Besides, there are mixed costs, which contain both constant and variable components. Part of these costs changes with changes in production volume, and the other part does not depend on production volume and remains fixed during the reporting period. For example, a monthly telephone fee includes a constant amount of the subscription fee and a variable part, which depends on the number and duration of long-distance telephone calls.

Sometimes mixed costs are also called semi-variable and semi-fixed. For example, if economic activity the enterprise is expanding, then at a certain stage there may be a need for additional warehouse space to store its products, which, in turn, will cause an increase in rental costs. Thus, fixed costs (rent) will change as activity levels change.

Therefore, when accounting for costs, they must be clearly distinguished between fixed and variable.

Dividing costs into fixed and variable is important in choosing an accounting and costing system. In addition, this grouping of costs is used in the analysis and forecasting of break-even production and, ultimately, for choosing the economic policy of the enterprise.

In paragraph 10 of IFRS 2"Reserves" defined three groups of costs, included in the cost of production, namely: (1) production variable direct costs, (2) production variable indirect costs, (3) production fixed indirect costs, which we will further call production overhead costs.

Table Production costs in cost according to IFRS 2

Related information.

Of course, producers are not at all indifferent to the total amount of their costs, but they are no less worried about average costs, that is, costs per unit of production. In particular, it is the indicators of average costs that are usually used for comparison with the price, which is always indicated per unit of production.

Figure 3. Average cost curves

It is important for us to understand how these figures per unit of production are calculated and how they change depending on changes in production volume.

1. Average fixed costs (AFC) are determined by dividing total fixed costs (TFC) by the corresponding amount of output ( Q ). That is

Since the amount of fixed costs is, by definition, independent of the volume of production, AFC will fall as the quantity produced increases. With increasing production volume this amount fixed costs are distributed over more and more products. This is what business administration usually calls “overhead allocation.” In Figure 3, we find that the AFC curve decreases continuously as output increases.

2. Average Variable Cost (AVC) are determined by dividing the total variable costs (TVC) by the corresponding quantity of manufactured products (Q):

AVCs first fall, reach their mini-mom, and then begin to rise. On the graph, this gives us a circular arc-shaped AVC curve, which is shown in Figure 3.

Since the amounts of variable costs are subject to the law of diminishing returns, this should also be reflected in the indicators of average variable costs calculated on the basis of these amounts. With a small production volume, the production process will be relatively inefficient and expensive, since the company's existing equipment will be underutilized. An insufficient number of variable resources will be combined with the company's equipment; production will be inefficient, and variable costs per unit of output will be correspondingly relatively high. However, as production expands, a higher level of worker specialization and more complete use of the firm's capital equipment will ensure increased production efficiency. As a result, variable costs per unit of output will decrease. As more and more variable resources are used, there will eventually come a point where the law of diminishing returns comes into play. From this point on, the firm's capital equipment will be used so intensively that each additional unit of variable resources will increase production volume by a smaller amount than the previous one. This means that AVC will begin to increase.

3. Average total costs (ATC) can be calculated by dividing the sum of total costs by the number of products produced (Q) or, more simply, by adding AFC and AVC for each of the possible production volumes. That is

ATC = TC / Q = AFC + AVC.

In Figure 3, the ATC curve is obtained by adding vertically AFC and AVC. Therefore, the difference in the height of the ATC and AVC curves depends on the value of AFC for each given volume of production.