Full cost or cost of goods sold. See what “Cost” is in other dictionaries
Simply put, we can define the cost of production as a combination of costs expressed in monetary terms aimed at the production and sale of manufactured goods or services. However, there are many concepts of cost, since it increases at different stages of production and management. The topic of this article is production cost, and we will look at this concept in more detail.
Production cost of production: definition
The work of companies is always focused on the production of goods. At the same time, the company incurs costs by investing raw materials, labor and energy resources in the manufactured product, i.e. expenses called production costs.
To find out what expenses make up the production cost of a product, we will learn about the main types of cost. As costs increase and fit into the price of the goods produced, a distinction is made between workshop, production and full cost.
Shop costs are the costs incurred by the company's production structures involved in the process of creating products. The production cost is formed by the workshop cost, supplemented by general and target expenses. The full cost is understood as the production cost plus the costs of transportation and delivery of goods to the market.
So, production cost is the totality of all costs of producing a product and does not include costs associated with sales.
Classification of costs for creating a product
The production cost of products includes the costs:
- materials;
- shop staff salaries;
- contributions to funds;
- wear and tear of fixed assets and intangible materials;
- others.
The cost is calculated according to cost items aimed at the production and subsequent sale of products by calculating its cost. A standard grouping of costs is used, which makes it possible to most accurately calculate the cost of a costing object, for example, the type of product produced. All costs are distributed according to costing items:
- raw materials and materials, minus useful returnable balances;
- purchased and produced semi-finished products;
- fuel, heat and electricity;
- depreciation of fixed assets/intangible assets;
- remuneration of production workers;
- contributions to funds;
- organization of the production process and its development;
- general production and general business expenses;
- losses from marriage;
- other production costs;
- selling expenses.
Production cost: formula
The summation of expenses allocated to all of the listed items, except for costs associated with sales, forms the production cost of manufactured products. A simplified formula for calculating production costs may look like this: C = M + A + Z + P, where M is materials, A is depreciation, Z is wages, P is other expenses.
Other costs in this formula are understood as target, general production and general industry costs.
Depending on the company’s field of activity, the production cost of a product may also include other industry-specific costs, which often predominate over others. Economists rely on them when they work to reduce costs and increase the profitability of a product. These studies are another purpose of calculating the production cost of a product.
Since in the cost structure, expenses are grouped item by item, each indicator included in the calculation has a corresponding percentage part, and the cost items determine the ratio of the group of expenses to the total amount, specifying the priority of some and the possibility of reducing others. Since the share cost indicator is influenced by a variety of external and internal economic factors, a constant cost value cannot be achieved even among manufacturers of identical products. Therefore, the concept of actual production cost was introduced, i.e., calculated for a given point in time.
Calculation of production costs is important for an enterprise and has a direct impact on building a company’s development strategy, its position in the industry, and competent analysis allows you to use production resources in the creation of goods most effectively.
The concept of product cost, cost calculation methods
Information on determining the cost price, methods for calculating the cost price of products
1. The essence of the concept of cost
Product cost
Cost of individual products (types of products)
2. Cost of industrial products and their structures
3. Technical and economic factors and cost reduction reserves
Cprime cost- these are all the costs (expenses) incurred by the enterprise for the production and sale (sale) of products or services
Cost price- this is the valuation of products (works, services) used in the production process natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources and other costs for its production and sale
Cprime cost- these are the costs of enterprises directly related to the production, purchase and sale of products, performance of work and provision of services
Product cost- this is the monetary expression of the direct costs of the enterprise for the production and sale of products.
The essence of the concept of cost Getting the greatest effect with the least cost, saving labor, material and financial resources depend on how the enterprise solves the issues of reducing the cost of production. The immediate objectives of the analysis are: checking the validity of the cost plan, the progressiveness of cost standards; assessing the implementation of the plan and studying the reasons for deviations from it and dynamic changes; identifying reserves for cost reduction; finding ways to mobilize them. Identification of reserves for cost reduction should be based on a comprehensive technical and economic analysis of the enterprise: study of the technical and organizational level of production, use of production facilities and fixed assets, raw materials, labor, economic relations.
The costs of living and embodied labor in the production process constitute production costs. In the conditions of commodity-money relations and the economic isolation of the enterprise, differences inevitably remain between the social costs of production and the costs of the enterprise. Social costs of production are the totality of living and embodied labor, which is expressed in the cost of products. The costs of an enterprise consist of the entire amount of expenses of the enterprise for the production of products and their sale. These costs, expressed in monetary terms, are called prime costs and are part of the cost of the product. It includes the cost of raw materials, materials, fuel, electricity and other items of labor, depreciation, wage production personnel and others cash expenses. Reducing production costs means saving material and living labor and is the most important factor in increasing production efficiency and increasing savings. The largest share of the costs of industrial production falls on raw materials and basic materials, followed by wages and depreciation. The cost of production is interconnected with production efficiency indicators. It reflects most of the cost of products and depends on changes in the conditions of production and sale of products. Technical and economic factors of production have a significant impact on the level of costs. This influence manifests itself depending on changes in technology, technology, organization of production, in the structure and quality of products and on the amount of costs for its production. Cost analysis, as a rule, is carried out systematically throughout the year in order to identify internal production reserves for their reduction.
In economics and for applied problems There are several types of cost:
Full cost (average) - the ratio of total costs to production volume;
Marginal cost is the cost of each subsequent unit produced;
Types of cost:
Cost by costing items (distribution of costs for compiling cost by accounting items);
Cost by cost elements.
A modern way to fairly determine the full cost of a product is activity-based costing.
Cost changes with each unit of good or service produced or purchased. Here's a simple example:
You drove your car to the store to buy a pack of butter, costing 30 rubles. We will calculate the cost of this pack for you. You have spent one hour of time. Let's say an hour of your time is valued at 100 rubles. You have used up fuel in your car. Let's say fuel was spent in the amount of 50 rubles. Also your car has worn out (depreciation). Let’s say 10 rubles were written off for depreciation. Thus, the cost of your pack of butter will be 190 rubles. (price*quantity+costs)/quantity. But if you purchased 2 packs of butter, the cost will change. (price*2+costs)/2 = 110 rubles per pack.
The cost of products (works, services) is a valuation of the natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources used in the production process of products (works, services), as well as other costs for its production and sale.
Product cost
The cost of production is a synthetic, generalizing indicator that characterizes all aspects of the enterprise’s activities, as well as reflecting the efficiency of its work.
The cost of production includes the following costs:
for preparation of production and development of production of new types of products, start-up work;
market research;
directly related to the production of products, determined by the technology and organization of production, including management costs;
to improve technology and organization of the production process, as well as improve the quality of manufactured products;
for sales of products (packaging, transportation, advertising, storage, etc.);
recruitment and training;
other cash expenses of the enterprise associated with the production and sale of products.
There is the following classification of costs:
by degree of homogeneity - elemental(homogeneous in composition and economic content - material costs, wages, deductions from it, depreciation charges, etc.) and complex(different in composition, covering several cost elements - for example, the costs of maintaining and operating equipment);
in connection with production volume - permanent(their total value does not depend on the quantity of manufactured products, for example, the costs of maintaining and operating buildings and structures) and variables(their total amount depends on the volume of manufactured products, for example, costs of raw materials, basic materials, components). Variable costs, in turn, can be divided into proportional(change in direct proportion to the volume of production) and disproportionate;
according to the method of attributing costs to the cost of individual products - straight(directly related to the manufacture of certain products and are directly charged to the cost of each of them) and indirect(related to the production of several types of products, they are distributed between them according to some criterion).
You should also distinguish between total costs (for the entire volume of production for a certain period) and costs per unit of production.
Cost of individual products (types of products)
When determining the cost of certain types of products (works, services), the grouping of costs per unit of production by costing items is used, which is necessary in the process of pricing for different types products (products), calculating their profitability, analyzing the costs of producing identical products with competitors, etc.
There are planned and actual calculations.
The main object of calculation is finished products (products) intended for release outside the enterprise.
The list of costing items, their composition and methods for distributing costs by type of product (work, service) are determined by industry guidelines on planning, accounting and calculating the cost of products (work, services), taking into account the nature and structure of production.
Most industrial enterprises have adopted the following standard (approximate) nomenclature of costing items:
raw materials and materials;
technological energy;
basic wages for production workers;
additional wages for production workers;
deductions for social needs from the basic and additional wages of production workers;
shop (general production) expenses;
general running costs;
preparation and development of production;
non-production expenses (marketing and sales).
The sum of the first seven items forms the workshop cost, nine – the production cost, and all items – the total cost of production.
In the context of the transition to market relations, many small and medium-sized enterprises use a reduced range of costing items.
The cost structure for costing items shows: the ratio of costs in the total cost of production, what was spent, where it was spent, for what purposes the funds were directed. It allows you to highlight the costs of each workshop or division of the enterprise.
If in the production cost estimate only economically homogeneous cost elements are combined, then in the costing items only some are homogeneous, and the rest include different kinds expenses, i.e. are complexes.
Factors that ensure cost reduction include: saving all types of resources consumed in production - labor and material; increasing labor productivity, reducing losses from defects and downtime; improving the use of fixed production assets; application latest technology; reduction of sales costs; changes in the structure of the production program as a result of assortment shifts; reduction of management costs and other factors.
Cost of industrial products and their structures
The cost of production is one of the most important economic indicators of the activities of industrial enterprises and associations, expressing in monetary form all the costs of the enterprise associated with the production and sale of products. Cost shows how much the products it produces cost the company. The cost includes the costs of past labor transferred to products (depreciation of fixed assets, cost of raw materials, fuel and other material resources) and expenses for remuneration of employees of the enterprise (wages).
There are four types of cost of industrial products. The workshop cost includes the costs of a given workshop for the production of products. The general plant (general factory) cost shows all the costs of the enterprise for the production of products. The total cost characterizes the enterprise’s costs not only for production, but also for the sale of products. Industry cost depends both on the performance of individual enterprises and on the organization of production in the industry as a whole.
Systematic reduction of production costs provides the state with additional funds both for the further development of social production and for improving the material well-being of workers. Reducing production costs is the most important source of profit growth for enterprises.
Costs for the production of industrial products are planned and accounted for by primary economic elements and expense items.
Grouping by primary economic elements allows you to develop an estimate of production costs, which determines the enterprise's total need for material resources, the amount of depreciation of fixed assets, labor costs and other cash expenses of the enterprise. In industry, the following grouping of costs according to their economic elements is accepted:
raw materials and basic materials,
auxiliary materials,
fuel (from the side),
energy (from the side),
depreciation of fixed assets,
wage,
social insurance contributions,
other costs not distributed among elements
The ratio of individual economic elements in total costs determines the structure of production costs. Different industries have different production cost structures; it depends on the specific conditions of each industry.
Grouping costs by economic elements shows the material and monetary costs of an enterprise without distributing them to individual types of products and other economic needs. Based on economic elements, as a rule, it is impossible to determine the cost per unit of production. Therefore, along with grouping costs by economic elements, production costs are planned and accounted for according to expense items (costing items).
Grouping costs by expense items makes it possible to see costs by their location and purpose, to know how much it costs the company to produce and sell certain types of products. Planning and accounting of cost by item of expenditure are necessary in order to determine under the influence of what factors a given level of cost was formed and in what directions the struggle to reduce it should be carried out.
In industry, the following nomenclature of basic costing items is used:
raw materials and supplies
fuel and energy for technological needs
basic salary for production workers
expenses for maintenance and operation of equipment
shop expenses
general factory expenses
losses from defects, non-production costs. The first seven expense items form the factory cost. The total cost consists of factory cost and non-production costs. Enterprise costs included in the cost of production are divided into direct and indirect. Direct costs include costs directly related to the manufacture of products and accounted for directly according to their certain species: the cost of basic materials, fuel and energy for technological needs, wages of basic production expenses, etc. Indirect costs include costs that are impossible or impractical to directly attribute to the cost of specific types of products: shop costs, general plant (general factory) costs, maintenance and operation equipment.
Shop and general plant expenses in most industries are included in the cost of certain types of products by distributing them in proportion to the amount of wages, production expenses (without additional payments according to the progressive bonus system) and the costs of maintaining and operating equipment. For example, the amount of shop expenses for the month amounted to 75 million rubles, and the basic salary of production workers was 100 million rubles. This means that shop costs will be included in the cost of certain types of products in the amount of 75% of the amount of the basic wages of production workers accrued for certain types of products. The item “Non-production expenses” takes into account mainly the costs of selling finished products (costs of containers, product packaging, etc.) and expenses for research work, personnel training costs, costs of delivering products to the departure station, etc. .P. As a rule, non-production costs are included in the cost of certain types of products in proportion to their factory cost. The cost of individual types of products is determined by drawing up calculations that show the cost of production and sales of a unit of product. Calculations are compiled according to cost items accepted in a given industry. There are three types of calculations: planned, normative and reporting. In planned costing, cost is determined by calculating costs for individual items, and in standard costing - according to the standards in force at a given enterprise, and therefore, unlike planned costing, due to a decrease in standards as a result of organizational and technical measures, it is revised, as a rule, monthly. Reporting costing is prepared based on data accounting and shows the actual cost of the product, making it possible to check the implementation of the plan for the cost of products and identify deviations from the plan in individual production areas. Correct calculation of product costs has important: the better the accounting is organized, the more advanced the calculation methods, the easier it is to identify reserves for reducing the cost of production through analysis. At industrial enterprises, three main methods are used for calculating production costs and accounting for production costs: order-based, distribution-based and standard. The custom method is most often used in individual and small-scale production, as well as for calculating the cost of repair and experimental work. This method consists in the fact that production costs are taken into account according to orders for a product or a group of products. The actual cost of an order is determined upon completion of the manufacture of products or work related to this order, by summing up all costs for this order. To calculate the cost per unit of production, the total cost of the order is divided by the number of products produced.
The incremental costing method is used in mass production with a short but complete technological cycle, when the products produced by the enterprise are homogeneous in terms of the source material and the nature of processing. Cost accounting in this method is carried out by stages (phases) of the production process. The normative method of accounting and calculation is the most progressive, because it allows for daily control over the progress of the production process, over the implementation of tasks to reduce production costs. In this case, production costs are divided into two parts: costs within the norms and deviations from consumption norms. All costs within the norms are taken into account without grouping, according to individual orders. Deviations from established standards are taken into account according to their causes and culprits, which makes it possible to quickly analyze the causes of deviations and prevent them in the process of work. In this case, the actual cost of products using the standard accounting method is determined by summing up costs according to standards and costs as a result of deviations and changes in current standards.
Technical and economic factors and reserves for cost reduction Currently, when analyzing the actual cost of manufactured products, identifying reserves and the economic effect of reducing it, calculations based on economic factors are used. Economic factors most fully cover all elements of the production process - means, objects of labor and labor itself. They reflect the main directions of work of enterprise teams to reduce costs: increasing labor productivity, introducing advanced equipment and technology, better use of equipment, cheaper procurement and better use of labor items, reduction of administrative, managerial and other overhead costs, reduction of defects and elimination of unproductive expenses and losses. .
Savings that determine the actual cost reduction are calculated according to the following composition (standard list) of factors:
Increasing the technical level of production. This is the introduction of new, progressive technology, mechanization and automation of production processes; improving the use and application of new types of raw materials and materials; design changes and technical characteristics products; other factors that increase the technical level of production.
For this group, the impact on the cost of scientific and technical achievements and best practices is analyzed. For each event, the economic effect is calculated, which is expressed in a reduction in production costs. Savings from the implementation of measures are determined by comparing the cost per unit of production before and after the implementation of measures and multiplying the resulting difference by the volume of production in the planned year: E = (SS - CH) * AN, where E is the savings in direct current costs CC is the direct current costs of unit of production before the implementation of the measure CH - direct current costs after the implementation of the measure AN - volume of production in physical units from the beginning of the implementation of the measure until the end of the planned year. At the same time, carryover savings from those activities carried out in the previous year should also be taken into account. It can be defined as the difference between the annual estimated savings and its part taken into account in the planned calculations of the previous year. For activities that are planned over a number of years, savings are calculated based on the amount of work performed using new technology, only in the reporting year, without taking into account the scale of implementation before the beginning of this year.
Cost reduction can occur when creating automated systems management, use of computers, improvement and modernization of existing equipment and technology. Costs are also reduced as a result of the integrated use of raw materials, the use of economical substitutes, and the complete use of waste in production. A large reserve also conceals the improvement of products, a reduction in their material and labor intensity, a reduction in the weight of machinery and equipment, a reduction overall dimensions and etc. Improving the organization of production and labor. A reduction in cost can occur as a result of changes in the organization of production, forms and methods of labor with the development of production specialization; improving production management and reducing production costs; improving the use of fixed assets; improvement of logistics; reducing transport costs; other factors that increase the level of organization of production. With the simultaneous improvement of technology and production organization, it is necessary to establish savings for each factor separately and include them in the appropriate groups. If such a division is difficult to make, then savings can be calculated based on the targeted nature of the activities or by groups of factors. The reduction in current costs occurs as a result of improving the maintenance of the main production (for example, the development continuous production , increasing the shift ratio, streamlining auxiliary technological work, improving the tool economy, improving the organization of control over the quality of work and products). A significant reduction in living labor costs can occur with an increase in standards and service areas, a reduction in lost working time, and a decrease in the number of workers who do not meet production standards. These savings can be calculated by multiplying the number of redundant workers by the average wage in the previous year (with social insurance charges and taking into account the costs of clothing, food, etc.). Additional savings arise when improving the management structure of the enterprise as a whole. It is expressed in a reduction in management costs and in savings in wages and salaries due to the release of management personnel. With improved use of fixed assets, cost reduction occurs as a result of increased reliability and durability of equipment; improving the preventive maintenance system; centralization and introduction of industrial methods of repair, maintenance and operation of fixed assets. Savings are calculated as the product of the absolute reduction in costs (except depreciation) per unit of equipment (or other fixed assets) by the average amount of equipment (or other fixed assets). Improving the logistics supply and use of material resources is reflected in a reduction in the consumption rates of raw materials and supplies, reducing their cost by reducing procurement and storage costs. Transport costs are reduced as a result of reduced costs for the delivery of raw materials and supplies from the supplier to the enterprise's warehouses, from factory warehouses to places of consumption; reducing the cost of transporting finished products. Certain reserves for reducing costs are laid down in the elimination or reduction of costs that are not necessary in the normal organization of the production process (excessive consumption of raw materials, materials, fuel, energy, additional payments to workers for deviations from normal working conditions and overtime work, payments for regressive claims, etc.). P.). Identifying these unnecessary costs requires special methods and attention of the enterprise team. They can be identified by conducting special surveys and one-time accounting, when analyzing data from standard accounting of production costs, and a thorough analysis of planned and actual production costs. Changes in the volume and structure of products, which can lead to a relative reduction in semi-fixed costs (except for depreciation), a relative reduction in depreciation charges, a change in the nomenclature and range of products, and an increase in their quality. Conditionally fixed costs do not depend directly on the quantity of products produced. With an increase in production volume, their quantity per unit of production decreases, which leads to a decrease in its cost. Relative savings on semi-fixed costs are determined by the formula EP = (T * PS) / 100, where EP is the savings on semi-fixed costs PS is the amount of semi-fixed costs in the base year T is the growth rate of marketable products compared to the base year. The relative change in depreciation charges is calculated separately. Part of the depreciation charges (as well as other production costs) is not included in the cost price, but is reimbursed from other sources (special funds, payments for external services that are not included in commercial products, etc.), so the total amount of depreciation may decrease. The decrease is determined based on actual data for the reporting period. The total savings on depreciation charges are calculated using the formula EA = (AOC / DO - A1K / D1) * D1, where EA is the savings due to the relative decrease in depreciation charges A0, A1 is the amount of depreciation charges in the base and reporting year K is a coefficient taking into account the amount of depreciation charges attributed to the cost of production in the base year D0, D1 - the volume of marketable products of the base and reporting year. To avoid double billing, the total amount of savings is reduced (increased) by the part that is taken into account by other factors. Changes in the nomenclature and range of products produced are one of the important factors affecting the level of production costs. With different profitability of individual products (relative to cost), shifts in the composition of products associated with improving its structure and increasing production efficiency can lead to both a decrease and an increase in production costs. The impact of changes in the product structure on cost is analyzed based on variable costs for costing items of the standard nomenclature. Calculation of the influence of the structure of manufactured products on cost must be linked to indicators of increasing labor productivity. Improved use of natural resources. This takes into account: changes in the composition and quality of raw materials; changes in the productivity of deposits, the volume of preparatory work during extraction, methods of extraction of natural raw materials; changing others natural conditions. These factors reflect the influence of natural conditions on the amount of variable costs. An analysis of their impact on reducing production costs is carried out on the basis of industry methods in the extractive industries. Industry and other factors. These include: commissioning and development of new workshops, production units and production facilities, preparation and development of production in existing associations and enterprises; other factors. It is necessary to analyze the reserves for reducing costs as a result of the liquidation of obsolete and the introduction of new workshops and production facilities on a higher technical basis, with better economic indicators. Significant reserves are included in reducing costs for the preparation and development of new types of products and new technological processes, in reducing the costs of the start-up period for newly commissioned workshops and facilities. The calculation of the amount of change in expenses is carried out using the formula EP = (C1 / D1 - C0 / D0) * D1, where EP is the change in the costs of preparation and development of production C0, C1 - the amount of costs of the base and reporting year D0, D1 - the volume of marketable products of the base and reporting year. The impact on the cost of commercial products of changes in the location of production is analyzed when the same type of product is produced at several enterprises that have unequal costs as a result of the use of different technological processes. In this case, it is advisable to calculate the optimal placement of certain types of products at the enterprises of the association, taking into account the use of existing capacities, reducing production costs and, based on a comparison of the optimal option with the actual one, to identify reserves. If changes in the amount of costs during the analyzed period are not reflected in the above factors, then they are classified as other. These include, for example, changes in the size or termination of various types of mandatory payments, changes in the amount of costs included in the cost of production, etc. The cost reduction factors and reserves identified as a result of the analysis must be summed up in the final conclusions, the total influence of all factors on the reduction of the total cost per unit of production.
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This indicator shows how efficient and profitable production is. Also, cost directly affects pricing. Now we will tell you in detail everything about this quality indicator and learn how to calculate it.
General concept of cost
In every economics textbook you can find a varied interpretation of the term “cost”. But no matter how the definition sounds, its essence does not change.
Product cost - Thisthe sum of all costs incurred by the enterprise for the manufacture of goods and its subsequent sale.
Costs are understood as expenses associated with the purchase of raw materials and materials necessary for production, remuneration of workers, transportation, storage and sale of finished products.
At first glance, it may seem that calculating the cost of production is quite simple, but this is not entirely true. At every enterprise, such an important process is entrusted only to qualified accountants.
It is necessary to calculate the cost of goods regularly. This is often done at certain intervals. Every quarter, 6 and 12 months.
Types and types of cost
Before you start calculating production costs, you need to study what types and types it is divided into.
Cost can be of 2 types:
- Full or medium– includes absolutely all expenses of the enterprise. All costs associated with the purchase of equipment, tools, materials, transportation of goods, etc. are taken into account. The indicator is averaged;
- Limit – depends on the quantity of products produced and reflects the cost of all additional manufactured units of goods. Thanks to the obtained value, it is possible to calculate the efficiency of further expansion of production.
The cost is also divided into several types:
- Workshop cost– consists of the costs of all enterprise structures whose activities are aimed at producing new products;
- Production cost– represents the sum of shop costs, target and general expenses;
- Full cost– includes production costs and costs associated with the sale of finished products;
- Indirect or general business cost– consists of costs that are not directly related to the production process. These are management expenses.
Cost can be actual or standard.
When calculating the actual cost, real data is taken, i.e. Based on actual costs, the price of the product is formed. It is very inconvenient to make such a calculation, because Often it is necessary to find out the cost of a product before it is sold. The profitability of the business depends on this.
When calculating standard cost, data is taken in accordance with production standards. Thanks to this, it is possible to strictly control the consumption of materials, which minimizes the occurrence of unjustified expenses.
Product cost structure
All enterprises that produce products or provide services are different from each other. For example , The technological processes of an ice cream manufacturing plant and a soft toy sewing factory are completely different.
Therefore, each production individually calculates the cost of finished products. This becomes possible thanks to a flexible cost structure.
Cost is the amount of expenses. They can be divided into the following categories:
- Expenses on raw materials and materials necessary for production;
- Energy costs. Some industries take into account the costs associated with using a certain type of fuel;
- Costs of machinery and equipment through which production is carried out;
- Payment of wages to employees. This item also includes payments related to taxes and social services. payments;
- Production expenses (premises rental, advertising campaigns, etc.);
- Expenses for social events;
- Depreciation deductions;
- Administrative costs;
- Payment for services of third parties.
All costs and expenses are percentages. Thanks to this, it is easier for the head of the enterprise to find the “weak” aspects of production.
The cost price is not constant. It is influenced by factors such as:
- Inflation;
- Loan rates (if the company has any);
- Geographical location of production;
- Number of competitors;
- Use of modern equipment, etc.
In order for the enterprise not to go bankrupt, it is necessary to timely calculate the cost of the product.
Formation of production costs
When calculating production costs, the costs required to produce products are summed up. This indicator does not take into account the costs of selling products.
The formation of the cost price at the enterprise occurs before the products are sold, because the price of the product depends on the value of this indicator.
It can be calculated in several ways, but the most common is cost calculation. Thanks to it you can calculate how much is spent Money to produce 1 unit of product.
Classification of production costs
As we said earlier, production costs (product cost) are different at each enterprise, but they are grouped according to individual characteristics, which makes it easier to make calculations.
Costs, depending on the method of their inclusion in the cost, are:
- Direct - those that relate directly to the production of products. That is, costs associated with the purchase of material or raw materials, payment of workers who participate in the production process, etc.;
- Indirect costs are those costs that cannot be attributed directly to production. These include commercial, general and general production costs. For example, executive salaries.
In relation to the entire production volume, costs are:
- Constant - those that do not depend on production volumes. These include rent of premises, depreciation charges, etc.;
- Variables are costs that directly depend on the volume of products produced. For example, costs associated with the purchase of raw materials and materials.
Depending on the importance of a specific manager’s decision, costs are:
- Irrelevant - costs that do not depend on the decision of the manager.
- Relevant – dependent on management decisions.
For better understanding, consider the following example. The company has an empty premises at its disposal. Certain funds are allocated for the maintenance of this structure. Their value does not depend on whether some process is being performed there. The manager plans to expand production and use this premises. In this case, he will need to purchase new equipment and create workplaces.
There are two ways to calculate the cost of production in production. These are the costing method and the tiering method. The first method is most often used, since it allows you to more accurately and quickly determine the cost of production. We will look at it in detail.
Cost calculation - This is a calculation of the amount of costs and expenses that fall on a unit of production. In this case, costs are grouped by item, due to which calculations are made.
Depending on the production activity and its costs, calculation can be carried out using several methods:
- Direct costing. This is a production accounting system that arose and developed in a market economy. This is how the limited cost is calculated. That is, only direct costs are used in the calculation. Indirect are written off to the sales account;
- Custom method. Used to calculate the manufacturing cost of each unit of production. It is used in enterprises that produce unique equipment. For complex and labor-intensive orders, it is rational to calculate costs for each product. For example, at a shipbuilding plant where several ships are produced per year, it is rational to calculate the cost of each one separately;
- Transverse method. This method is used by enterprises that carry out mass production, and the manufacturing process consists of several stages. The cost is calculated for each stage of production. For example, in a bakery, products are produced in several stages. In one workshop the dough is kneaded, in another bakery products are baked, in a third they are packaged, etc. In this case, the cost of each process is calculated separately;
- Process method. It is used by mining industry enterprises, or companies with a simple technological process (for example, in the production of asphalt).
How to calculate cost
Depending on the type and type, there may be several variations of cost calculation formulas. We will look at simplified and expanded ones. Thanks to the first, every person who does not have an economic education will understand how this indicator is calculated. Using the second, you can make a real calculation of production costs.
A simplified version of the formula for calculating the total cost of a product looks like this:
Total cost = Production cost of the product + Selling costs
You can calculate the cost of sales using the expanded formula:
PST = PF + MO + MV + T + E + RS + A + ZO + NR + ZD + OSS + CR
- PF – expenses for the purchase of semi-finished products;
- MO – costs associated with the purchase of basic materials;
- MV - related materials;
- TR – transport costs;
- E – costs of paying for energy resources;
- РС – expenses associated with the sale of finished products;
- A – depreciation expenses;
- ZO – remuneration of the main workers;
- HP – non-production costs;
- ZD – allowances for workers;
- ZR – factory expenses;
- OSS – insurance contributions;
- CR – shop expenses.
To make it clear to everyone how to make calculations, we will give an example of cost calculation and step-by-step instructions
Before you start with the numbers, you need to do the following:
- Sum up all the costs associated with the purchase of raw materials and materials necessary for production;
- Calculate how much money was spent on energy resources;
- Add up all the expenses associated with paying salaries. Don't forget to add 12% for additional work and 38% for social services. deduction and health insurance;
- Add deductions for depreciation costs with other expenses that are associated with the maintenance of devices and equipment;
- Calculate the costs associated with selling products;
- Analyze and take into account other production costs.
Based on the initial data and cost calculation items, we make calculations:
| Expense category | Calculation | Total value | ||
| Fund allocations | Point 4 of the initial data | |||
| General production costs | Point 6 of the initial data | |||
| General running costs | Point 5 of the initial data | |||
| Production cost of 1000 m of pipes | Sum of points 1-6 ref. data | 3000+1500+2000+800+200+400 | ||
| Sales costs | Point 7 of the initial data | |||
| Full cost | Amount of production. Costs and sales expenses | |||
Components of cost - what does this indicator depend on?
As has already become known, the cost consists of the costs of the enterprise. It can be divided into different types and classes. This main factor, which must be taken into account when calculating the cost of an enterprise.
Different costs imply the presence of completely different components. For example, when calculating workshop costs, we do not take into account the costs of selling products. Therefore, every accountant is faced with the task of calculating exactly the indicator that will most accurately show the efficiency of a given enterprise.
The cost per unit of production depends on how well the production is organized. If each department of the enterprise “lives its own life”, employees are not interested in quickly and efficiently performing their duties, etc., then with great confidence, we can say that such an enterprise is suffering losses and has no future.
By reducing the cost of production, the company receives greater profits. That is why every manager is faced with the task of establishing the production process.
Cost reduction methods
Before you start reducing costs, you need to understand that the quality of the product should not suffer in any way. Otherwise, the savings will be unjustified.
There are many methods to reduce costs. We tried to collect some of the most popular and effective methods:
- Increase labor productivity;
- Automate workplaces, purchase and install new modern equipment;
- Engage in consolidation of the enterprise, think about cooperation;
- Expand the range, specificity and volume of products;
- Introduce a savings regime throughout the enterprise;
- Use energy resources wisely and use energy-saving equipment;
- Carry out a careful selection of partners, suppliers, etc.;
- Minimize the appearance of defective products;
- Reduce the cost of maintaining the management apparatus;
- Conduct market research regularly.
Conclusion
Cost is one of the most important quality indicators of any enterprise. It is not a constant value. The cost tends to change. Therefore, it is very important to periodically calculate it. Thanks to this, it will be possible to adjust the market value of the goods, which will avoid unjustified expenses.
§ 1. The essence of cost as an object of analysis.
§ 2. Problems of cost analysis and sources of information.
Chapter 2. Product cost analysis.
§ 1. Analysis of product costs by cost elements and costing items.
§ 2. Analysis of costs per ruble of marketable products.
§ 4. Analysis of the impact of labor costs on the cost price.
§ 5. Analysis of complex cost items.
5.1. Analysis of production maintenance and management costs.
5.2. Analysis of other complex cost items.
§ 1. The essence of cost as an object of analysis.
In the system of indicators characterizing the efficiency of production and sales, one of the leading places belongs to the cost of production.
The cost of production is the costs expressed in monetary terms for its production and sale. The cost of production as a synthetic indicator reflects all aspects of the production and financial and economic activities of the enterprise: the degree of use of material, labor and financial resources, the quality of work of individual employees and management as a whole.
The calculation of this indicator is necessary for many reasons, including to determine the profitability of individual types of products and production as a whole, determine wholesale prices for products, carry out intra-production cost accounting, and calculate national income across the country. Product cost is one of the main factors in generating profit. If it has increased, then, other things being equal, the amount of profit for this period will necessarily decrease due to this factor by the same amount. There is an inverse functional relationship between the size of profit and cost. The lower the cost, the greater the profit, and vice versa. Cost is one of the main parts economic activity and accordingly one of essential elements this control object.
One of the main conditions for obtaining reliable information about the cost of production is a clear definition of the composition of production costs. In our country, the composition of production costs is regulated by the state. The basic principles for the formation of this composition are defined in the Law of the Russian Federation “On the income tax of enterprises and organizations” and are specified in the Regulations on the composition of costs. In addition, on the basis of this Regulation, ministries, departments, intersectoral government associations, and concerns are developing sectoral regulations on the composition of costs and guidelines on issues of planning, accounting and calculating the cost of products (works, services) for subordinate enterprises. The regulatory role of the state in relation to the cost of production is also manifested in the establishment of depreciation standards for fixed assets, tariffs for contributions to social needs, etc.
The regulation on the composition of costs determines that the cost of products (works, services) is a valuation of the natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources used in the production process, as well as other costs for its production and sale.
In addition, in the practice of planning, accounting, calculation and analysis, a distinction is made between shop, production and full cost. The workshop cost of a product consists of the costs (direct and indirect) of all workshops not producing it. Production cost is formed from all enterprise costs associated with the production and management process. The total cost consists of production costs and non-production costs (i.e. costs associated with selling products to customers).
§ 2. Problems of cost analysis and sources of information.
The main objectives of analyzing the cost of products (works, services) are:
- an objective assessment of the implementation of the plan at cost and its changes relative to previous reporting periods, as well as compliance with current legislation, contractual and financial discipline;
- investigation of the reasons that caused the deviation of indicators from their planned values;
- providing cost responsibility centers with the necessary information for operational management of the formation of product costs;
- facilitating the development optimal size planned costs, planned and standard calculations for individual products and types of products;
- identification and summary calculation of reserves for reducing costs of production and sales of products;
The nature of these tasks indicates the great practical significance of the analysis of product costs in the economic activities of an enterprise.
Analysis of economic activity is based on a system of indicators and involves the use of data from a number of sources of economic information.
The main sources of information necessary for cost analysis are reporting data; accounting data (synthetic and analytical accounts reflecting the costs of material, labor and money, relevant statements, order journals and, if necessary, primary documents); planned (estimated, regulatory) data on the costs of production and sales of products and individual products (works, services).
§ 1. Analysis of product costs by cost elements and costing items.
Production costs of enterprises and associations in planning, accounting, reporting and analysis are grouped in 2 directions: by economic elements and costing items.
Cost analysis by element. The grouping of costs by elements is uniform and mandatory and is determined by the Regulations on the composition of costs. Grouping by economic elements shows What exactly spent on the production of products, what is the ratio of individual elements in the total amount of expenses. In this case, only purchased materials, products, fuel and energy are reflected in the elements of material costs. Remuneration and contributions for social needs are reflected only in relation to personnel of the main activity.
Grouping costs by elements allows you to control the formation, structure and dynamics of costs by type that characterize their economic content. This is necessary for studying the relationship between living and past (materialized) labor, rationing and analysis of production inventories, calculating partial turnover indicators of certain types of rationed working capital, as well as for other calculations at the sectoral, national and national economic levels (in particular, for calculating the amount of national income created in industry).
The element-by-element costs of all material and fuel and energy resources are used to determine the planned level of material costs and assess its compliance. Analysis of the element-by-element composition and structure of production costs makes it possible to outline the main directions for searching for reserves depending on the level of material intensity, labor intensity and capital intensity of production.
From Table 1.1 (see next page) it is clear that the main share of expenses falls on material costs and labor costs, therefore these elements need to be given special attention when identifying reserves for cost reduction.
In the reporting period, the shares of material costs and labor costs increased compared to the previous year, but were lower than planned by 0.9% and 0.4%, respectively. The share of the “Other costs” element increased by 1.8% compared to the plan, mainly due to a decrease in expenses for other elements.
Table 1.1. Cost analysis by element.
| Cost elements | For the last year | According to the plan for the reporting year | Actually for the reporting year | Change in actual allocation. weights compared | ||||
| amount, thousand rubles | allotment weight, % | amount, thousand rubles | allotment weight, % | amount, thousand rubles | allotment weight, % | compared to last year, % (group 6-group 2) | with plan, % (group 6-group 4) | |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | |
| Material costs | 57527 | 29,6% | 66258 | 31,3% | 60753 | 30,4% | +0,8% | -0,9% |
| Labor costs | 49484 | 25,5% | 59627 | 28,2% | 55457 | 27,8% | +2,3% | -0,4% |
| Contributions for social needs | 22602 | 11,6% | 22599 | 10,7% | 20335 | 10,2% | -1,5% | -0,5% |
| Depreciation of fixed assets | 19741 | 10,2% | 18252 | 8,6% | 17175 | 8,6% | -1,6% | -0,0% |
| Other costs | 44957 | 23,1% | 44949 | 21,2% | 46096 | 23,1% | -0,1% | +1,8% |
| Total: | 194311 | 100% | 211685 | 100% | 199816 | 100% | ||
Analysis of product costs based on costing items. The standard grouping of costs by costing items is established by the Basic Provisions for Planning, Accounting and Calculation of Product Costs at Industrial Enterprises. The itemized reflection of costs in planning, accounting, reporting and analysis reveals their intended purpose and connection with the technological process. This grouping is used to determine costs by individual types of products produced and the location of costs (workshops, sections, teams).
Some of the costing items are mainly single-element, i.e., expenses that are homogeneous in their economic content. These include raw materials and materials, purchased components and semi-finished products, fuel and energy for technological purposes, basic and additional wages of production workers, and social insurance contributions. When analyzing them, one cannot limit oneself only to indicators for the enterprise as a whole, since this neutralizes the results achieved in the production of individual products. Therefore, calculations of the influence of individual factors on the total cost of these items are subsequently detailed by individual products, types of consumable materials, systems and forms of remuneration of production workers based on reporting calculation data.
The remaining cost items are complex and combine several economic elements. Thus, the article “Costs for the maintenance and operation of equipment” includes the costs of materials, energy, fuel, labor costs, and depreciation of fixed assets. Such cost items as expenses for preparation and development of production, workshop, general plant (general economic) and other production expenses are also complex in nature. These costs are determined primarily by the total volume and organizational and technical level of production and are analyzed, as a rule, for the enterprise (association) as a whole or its individual divisions.
Analysis of plan implementation on an item-by-item basis begins with a comparison of actual costs with planned costs, recalculated to actual output and assortment. Thus, the identified deviations reveal changes in costs regardless of structural and assortment shifts in product output (Table 1.2).
Table 1.2. Cost analysis based on costing items
| No. | Expenditures | Actual products released, thousand rubles. | Deviations from the plan (+,-) | |||
| according to planned cost | according to actual cost | thousand roubles. | in percentages | |||
| to the planning item | to the whole plan. yourself | |||||
| A | B | 1 | 2 | 3 | 4 | 5 |
| 1 | Raw materials | 43456 | 37865 | -5591 | -12,9% | -2,75% |
| 2 | Returnable waste (subtracted) | -96 | -107 | -11 | +11,5% | -0,01% |
| 3 | Raw materials minus waste | 43360 | 37758 | -5602 | -12,9% | -2,75% |
| 4 | Purchased products, semi-finished products and production services of third-party enterprises and organizations | 19344 | 17134 | -2210 | -11,4% | -1,09% |
| 5 | Fuel and energy for technological purposes | 1006 | 1024 | +18 | +1,8% | +0,01% |
| 6 | TOTAL direct material costs | 63710 | 55916 | -7794 | -12,2% | -3,83% |
| 7 | Basic wages for production workers | 46783 | 42424 | -4359 | -9,3% | -2,14% |
| 8 | Additional wages for production workers | 8561 | 8545 | -16 | -0,2% | -0,01% |
| 9 | Social insurance contributions | 23730 | 21353 | -2377 | -10,0% | -1,17% |
| 10 | TOTAL direct salary with deductions | 79074 | 72322 | -6752 | -8,5% | -3,32% |
| 11 | Expenses for preparation and development of production | 2561 | 2549 | -12 | -0,5% | -0,01% |
| 12 | 10716 | 10329 | -387 | -3,6% | -0,19% | |
| 13 | Shop expenses | 13170 | 12873 | -297 | -2,3% | -0,15% |
| 14 | Factory overhead | 18420 | 18515 | +95 | +0,5% | +0,05% |
| 15 | TOTAL production maintenance and management costs | 44867 | 44266 | -601 | -1,3% | -0,30% |
| 16 | Losses from marriage | X | 72 | +72 | X | +0,04% |
| 17 | Other production costs | - | - | - | - | - |
| 18 | Production cost of commercial products | 187651 | 172576 | -15075 | -8,0% | -7,41% |
| 19 | Non-production (commercial) expenses | 15903 | 19554 | +3651 | +23,0% | +1,79% |
| 20 | Full cost of commercial products | 203554 | 192130 | -11424 | -5,6% | |
In gr. 4 tables 1.2 shows the percentage ratio of deviations from the plan to planned costs for each costing item; in gr. 5 – share of changes in costs for relevant items in the total percentage reduction in the total cost of marketable products. In this way, the degree of influence of deviations in individual items on the overall result is established.
In accordance with the table data, the total cost of manufactured products decreased in the reporting period by 11,424 thousand rubles, or 5.6%, compared to the plan. The most significant reduction in expenses was under the item “Raw materials” (-12.9%), which allowed saving 2.75% of the total planned cost of marketable products. The most significant excess of the plan (by 23%) is observed in non-production (commercial) expenses. This excess caused an increase in cost by 1.79% due to an increase in this item.
When analyzing, the main attention should be paid to those items for which unplanned losses and overexpenditures occurred. However, cost analysis should not be limited only to these items. Significant reserves for reducing the cost of production can be revealed for other items with a more detailed analysis of the costs of materials, fuel, energy, wage costs and complex cost items.
§ 2. Analysis of costs per ruble of marketable products.
In most industries, the cost target is approved by the enterprise in the form of a maximum cost level per ruble of marketable products.
The cost indicator per ruble of commercial products characterizes the level of cost of one ruble of impersonal products. It is calculated as the quotient of dividing the total cost of all marketable products by its cost in wholesale prices of the enterprise. This is the most general indicator of product cost, expressing its direct connection with profit. The advantages of this indicator also include its dynamism and wide comparability.
A direct influence on the change in the level of costs per ruble of commercial products is exerted by 4 factors that are in direct functional connection with it:
- change in the structure of manufactured products;
- changes in the level of costs for the production of individual products;
- changes in prices and tariffs for consumed material resources;
- changes in wholesale prices for products.
Let's consider the influence of these factors based on the data in Table 2.1.
Table 2.1. Costs per ruble of commercial products.
(calculation of indicators for periods 1-6 is given in.)
| Indicator name | Line no. | Calculation formula | Sum |
| Planned cost of the entire technological process, thousand rubles. | 1 | e qпSп | 203554 |
| Cost of all manufactured products: | |||
| b) at actual cost, thousand rubles. | 2 | e qfSp | 194321 |
| a) at planned cost, thousand rubles. | 3 | e qфSф | 192130 |
| TP in wholesale prices of enterprises: | |||
| a) according to plan, thousand rubles. | 4 | e qpSp | 250066 |
| b) actually in the prices adopted in the plan, i.e. | 5 | e qfSp | 235883 |
| c) actually in prices in force in the reporting year, thousand rubles. | 6 | e qfSf | 237199 |
| Costs per ruble of TP according to plan (page 1:page 4), kopecks. | 7 | e qпSп e qпСп | 81,40 |
| Costs per ruble of actually issued TP: | |||
| a) according to the plan, recalculated for actual production and assortment (page 2: page 5), cop. | 8 | e qfSp e qfSp | 82,38 |
| b) actually in prices in force in the reporting year (page 3:page 6), kopecks. | 9 | e qfSf e qfSf | 81,00 |
| c) actually in the prices adopted in the plan ((p. 3 - price change): p. 5), kopecks. | 10 | e qfS"f e qfSp | 79,46 |
| d) actually in wholesale prices for finished products adopted in the plan (page 3: page 5), kopecks. | 11 | e qfSf e qfSp | 81,45 |
| Costs per ruble of TP according to the report for last year, kopecks. | 12 | 81,90 | |
q -- number of products;
S -- cost per unit of product;
C -- wholesale price per unit of product;
S"f is the actual cost per unit of product, adjusted for changes in prices and tariffs for consumed material resources.
The total deviation of costs per ruble of marketable products from the plan is determined by comparing lines 9 and 7: 81.00 – 81.40 = –0.4 kopecks, i.e. actual costs turned out to be lower than those approved by the plan. Let us analyze the influence of each of the 4 factors listed above on this deviation.
Influence structural changes as part of the product determined by the following formula (compare lines 8 and 7 of Table 2.1):
Thus, changes in the range of manufactured products led to increase costs per ruble of marketable products by 0.98 kopecks. (82.38 – 81.40).
Influence changes in the level of costs for the production of individual products in the product composition is determined by the formula (difference between lines 10 and 8 of Table 2.1):
that is, 79.46 – 82.38 = –2.92 kopecks. The resulting change in cost due to this factor is net savings achieved as a result of reducing the cost of material resources, using more advanced equipment and technology, and increasing labor productivity.
Highlight Impact changes in prices and tariffs for consumed material resources you can use the formula
or by comparing terms 11 and 10 of the table: 81.45 – 79.46 = 1.99 kopecks. An increase in average prices and tariffs for resources led to increase cost indicator per ruble of marketable products by 1.99 kopecks.
The influence of the last factor - changes in wholesale prices for products is determined by comparing lines 9 and 11, i.e. according to the formula
The resulting deviation indicates decrease costs 0.45 kopecks. (81.00 – 81.45) due to an increase in the average selling prices set by the enterprise in the reporting period for its products.
At the end of the reporting period, the plan to reduce costs per ruble of marketable products was significantly exceeded (instead of reducing costs according to the plan by 0.5 kopecks, they were actually reduced by 0.9 kopecks). Having analyzed the influence of all 4 factors on this change, it turned out that the reduction in costs mainly accounts for pure savings, i.e., savings in the level of costs for the production of individual products. This is a positive thing. However, the total savings could have been significantly greater if not for the negative impact of 2 other factors. The company needs to pay special attention to the range of products, and also, if possible, take a more responsible approach to the selection of suppliers of material resources, since these factors (structural shift in products and increase in prices for consumed resources) influenced the increase in costs.
§ 3. Analysis of the impact on the cost of direct materials
costs.
The main objectives of the analysis of material costs as the most important component of product costs are:
- identification and measurement of the influence of individual groups of factors on the deviation of costs from the plan and their changes compared to previous periods;
- identifying reserves for saving material costs and ways to mobilize them.
When studying the reasons for deviations in the level of material costs from the planned, previous period and other comparison bases, these reasons are conventionally called factors prices, norms and replacements. Price factors mean not only changes in the price of raw materials and supplies, but also changes in transportation and procurement costs. The norm factor reflects not only the change in the consumption norms themselves, but also the deviation of the actual consumption per unit of production (specific consumption) from the norms. The replacement factor means, in addition to the impact of complete replacement of some species material assets others, changing their content in mixtures (formulations) and the content in them useful substances(especially common in the food industry).
The methods of analysis highlighting these groups of factors are the same for all items of material costs, i.e., raw materials and basic materials, fuel, purchased semi-finished products and components. (Below these techniques will be discussed using basic materials as an example.)
Price factor, i.e. a group of factors that determine procurement cost of materials consists of the cost of the materials themselves at supplier prices And transportation and procurement costs(TZR).
To determine the impact of changes in the level of fuel and equipment (after adjusting them for changes in tariffs) on the procurement cost of materials, it is necessary to have data on their percentage to the cost of procured materials and fuel. The data necessary for this can be obtained from analytical accounting to the “Materials” account.
At the analyzed enterprise, labor and production costs were planned in the amount of 4% of the cost of materials at supplier prices. Thus, the procurement cost of materials was 104% of the cost of materials at supplier prices. Actual average level TZR reached 5%. The overrun was 1% (105% – 104%). Having the actual procurement cost of materials consumed is 39,365 thousand rubles. (see Table 1.2), overexpenditure on TZR is determined as follows:
i.e., the cost of the materials used turned out to be 375 thousand rubles. more due to the excess of the actual percentage of TWP exceeding the planned value.
Of decisive importance for reducing costs is saving materials in kind - the norm factor and rational replacement of materials - the replacement factor. The leading role of these factors is explained by the fact that saving material costs under the influence of the price factor has a direct impact on reducing costs through a reduction amounts by items of material costs. Savings under the influence of factors of standards and replacement not only have a direct impact on these items, but create the opportunity to increase the volume of output and thereby indirectly affect the reduction in the level of fixed costs per unit of production, i.e. entails a relative reduction in general plant and shop expenses. Thus, the range of influence of saving material costs due to norms and replacement factors on reducing production costs is wider than due to the price factor.
Below is an analysis of the deviation of material consumption from the planned one in terms of the influence of norms, prices and replacement factors.
Table 3.1 (see next page) provides a breakdown of the costs of materials for calculating the cost of a refrigerator. To facilitate calculations, a recalculated planned indicator (column 7) is entered into the table, representing the product of the actual amount of material consumed by its planned procurement cost (conventionally called the price).
First of all, find the general deviation, i.e. the difference between the cost amounts according to the report and according to the plan (see Table 3.1, group 6–group 5).
To measure the impact of changes in specific consumption of materials on the amount of material costs, compare the value of the recalculated indicator with the planned amount of costs for each line. The difference shows the deviation due to the norms (gr. 7–gr. 5).
The impact of the price factor is measured by comparing the same actual quantity of materials consumed in two estimates - actual and planned prices, i.e., by subtracting the recalculated indicator from the actual amount of costs (column 6–column 7).
It remains to determine the impact of the replacement. The result of the replacement is determined by comparing the planned cost of the actually used set of materials with the planned one.
In this example, the actual set of materials consists of 2 components instead of 3 as planned. The changes were caused by the failure to meet the supply plan for brass, which was partially replaced by aluminum and synthetic materials.
Table 3.1. Material cost analysis.
| Name of calculation groups of materials, purchased semi-finished products and components | Consumption, kg | Price per kg, thousand rubles. | Amount thousand rubles | Deviation from plan (+,-), thousand rubles. | |||||||
| plan | report | plan | report | plan (column 1x gr.3) | report (gr.2 x gr.4) | recalculated target indicator (column 2 x group 3) | total (gr.6-gr.5) | including at the expense | |||
| norms (gr.7-gr.5) | prices (group 6-group 7) | replacements | |||||||||
| A | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
| Raw materials and main materials: | |||||||||||
| Sheet steel | 32,0 | 35,0 | 3,0 | 3,2 | 96,0 | 112,0 | 105,0 | +16,0 | +9,0 | +7,0 | --- |
| Tin | 1,2 | 1,1 | 18,0 | 18,4 | 21,6 | 20,2 | 19,8 | -1,4 | -1,8 | +0,4 | --- |
| Synthetic materials | X | X | X | X | 124,0 | 131,0 | 131,0 | ||||
| Aluminum | 3,0 | 8,0 | 5,1 | 5,9 | 15,3 | 47,2 | 40,8 | -10,0 | --- | +6,4 | -16,4 |
| Brass | 5,0 | 2,0 | 16,3 | 16,3 | 81,5 | 32,6 | 32,6 | ||||
| Other basic materials | X | X | X | X | 150,0 | 152,0 | 152,0 | +2,0 | +2,0 | --- | --- |
| TOTAL basic materials | 488,4 | 495,0 | 481,2 | +6,6 | +9,2 | +13,8 | -16,4 | ||||
In the columns of the table reserved for the recalculated indicator, the actually used set of materials is recorded, but at the planned procurement cost, only 204.4 thousand rubles. (131.0+40.8+32.6) instead of 220.8 thousand rubles. (124+15.3+81.5) according to plan. Consequently, the reduction in costs due to replacement amounted to 16.4 thousand rubles. with a simultaneous increase in the procurement cost of consumed aluminum by 6.4 thousand rubles. (price factor). The total savings on replaced materials amounted to 10 thousand rubles.
Based on the results of the deviations obtained in Table 3.1, it can be seen that the total cost of basic materials for the production of one refrigerator increased by 6.6 thousand rubles. This was a consequence of an increase in prices for materials (+13.8 thousand rubles) and an increase in their consumption rates (+9.2 thousand rubles), and only the replacement made led to savings in material costs (-16.4 thousand rubles). However, the replacement was made due to a supply failure, that is, it was not planned in advance, which indicates either the enterprise’s omissions in planning the consumption of certain materials for individual components of the refrigerator, or a decrease in the quality of the product as a result of a forced replacement.
In terms of actual production of refrigerators reserve for cost reduction by saving costs on materials is (thousand rubles):
due to the norms of 11.0 tr. * 61 pcs. = 671.0 t.r.
due to prices of 13.8 tr. * 61 pcs. = 841.8 t.r.
due to the replacement of 0.0 tr.(since there was no overspending)
Total 1512.8 t.r.
§ 4. Analysis of the impact of labor costs on the cost price.
Wages constitute one of the most important elements of production costs; its share is especially large in most branches of the mining industry, as well as in mechanical engineering. In the cost of production, only the wages of production workers are allocated as an independent item. Salaries of other categories of industrial production personnel are included in complex cost items, as well as transport and procurement expenses. The wages of workers employed in auxiliary production are included in the cost of steam, water, electricity and affect the cost of marketable products through those complex items that include the consumption of steam, water and energy.
The wages of piece workers and bonuses paid from the wage fund directly or indirectly depend on the fulfillment of the production plan (bonuses paid from the consumption fund do not affect the wage fund). Other components of the wage fund depend on the number of employees, tariff rates and official salaries, i.e. they are influenced by many common factors. Therefore, wage analysis is carried out in 2 directions: 1) analysis of the wage fund as an element of production costs; 2) analysis of wages in the context of individual calculation items, primarily an independent item - the wages of production workers.
Only after the general factors that caused deviations in the wage fund of certain categories of workers have been identified, is it determined to what extent they influenced different items of production costs.
Before starting to analyze the use of the wage fund, it is important to analyze the validity of its planned value. The specific methodology for such analysis will depend on the method of payroll planning adopted at the enterprise. In addition, when planning the wage fund and monitoring its expenditure, compliance with the planned ratio between the growth rate of average earnings (including payments from the consumption fund) and labor productivity must be checked.
The influence of the use of the wage fund of industrial production personnel on the cost of production. The cost of production includes all payments to industrial and production personnel. The salary fund of non-industrial personnel (canteens, clubs, pioneer camps, etc.) is not included in the cost of industrial products.
Absolute overexpenditure of the wage fund of industrial production personnel does not entail an increase in costs if the percentage of above-plan growth in production volume is higher than the wage fund, since in this case the costs per ruble of production are reduced compared to the planned level.
Exceeding the production volume plan must necessarily be accompanied by relative savings in the wage fund and an above-plan reduction in costs because in this case only payments to piece workers and bonuses increase, and the time wage does not change. The greater the share of time-based wages in the general wage fund, the greater (other things being equal) the savings achieved.
To determine the full amount of relative savings or overexpenditure of the wage fund and their impact on costs, it is necessary to proceed from the ratio of the growth rates of the wage fund and production. This ratio is equal to the ratio of the growth rate of labor productivity and average wages.
The fact is that labor productivity, measured by average output per worker, is the quotient of dividing production (Q) by the average number of workers (R), while average wages is the quotient of dividing the wage fund (F z) by the same average number of employees. The ratio of the growth rates of these fractions is equal to the ratio of the rate of change of the numerators of the fractions - the volume of production and the wage fund:
Determination of the influence of the actual ratio of growth rates of labor productivity and wages on the cost of manufactured products. One of the most important factors in reducing costs is the growth rate of labor productivity outpacing the growth rate of average wages.
Calculation of changes in the wage fund (D F z) under the influence of an increase in average annual output and the average annual salary of one employee or worker is carried out according to the formula
, Where
F salary - planned salary fund, thousand rubles.
3% and W% - growth rate, respectively, of the average annual salary of 1 worker and average annual labor productivity compared to the plan, %
Let's substitute the data from Table 4.1 into the formula.
Now it is necessary to determine how much of the savings is reflected in the cost of production. To do this, the amount of savings is multiplied by the ratio production cost of actual output to the amount production costs:
Thus, due to the rapid above-plan growth of labor productivity, wage costs included in the cost of production decreased by 313.1 thousand rubles.
The above calculation is approximate, since it does not take into account differences in the share of wages in production costs and production costs. These differences are inevitable because the cost of products produced in the reporting year includes the costs of parts and semi-finished products that were in work in progress at the beginning of the year, and part of the production costs of the reporting year relates to work in progress at the end of the year.
Analysis of the composition of the wage fund. Relative savings (or overspending) characterizes the use of the wage fund as a whole. In order to identify reserves for an additional reduction in wages per ruble of marketable products, it is necessary to first identify reserves for further growth in labor productivity and savings in average wages, primarily through the elimination of unproductive payments and unjustified increases in wages for certain categories of industrial production personnel.
For this purpose, the composition of the workers' wage fund is analyzed and unproductive payments, grouped according to the following 3 points:
- Additional payment to piece workers due to changes in working conditions;
- Additional pay for working overtime;
- Payment for forced downtime.
There is no need to separately calculate non-productive payments for defects, since the amount under the item “Losses from defects” is fully taken into account in the consolidated calculation of cost reduction reserves.
Reserves for reducing payments for service personnel salary fund are identified by analyzing deviations from the headcount plan and the average salary per employee of each category of personnel and determining the impact of these deviations on salary expenditure.
Overexpenditure of the wage fund due to the maintenance of an excess number of all categories of service personnel should be classified as non-production expenses, and its liquidation should be considered a reserve for reducing costs.
Deviations from the average salary plan may be caused by:
- an increase or decrease in the share of higher paid workers in total number corresponding category. (If there is an understaffing, such a deviation is inevitable and is not considered an overrun);
- violation of established salaries (the resulting overexpenditure of the fund is an unacceptable non-production expense);
- above-plan exceeding of production standards and above-plan payment of bonuses included in the salary fund (valid reasons), incorrect billing of work, unproductive payments and other shortcomings affecting the average salary (unvalid reasons).
The impact of a change in the number of employees on the wage fund is determined by multiplying the deviation from the plan for the number of employees (D N) by the planned average salary (Z p), and the impact of the deviation from the plan of the average annual salary (D Z) - by multiplying this deviation by the actual number of employees (N f) for certain categories of personnel (absolute difference method):
Analysis of wages of production workers. The wages of production workers are highlighted as a separate item in the calculation. A detailed analysis of this part of the fund is carried out for the most important products in those industries where the wages of production workers play a significant role in determining the cost of production and where, therefore, a special section of the calculation provides for a breakdown of the article “Basic and additional wages.”
Data on wage fund expenditure for production workers is shown in Table 4.2.
Table 4.2. Analysis of salaries of production workers.
| Products | Unit of measurement | Issue for | Wages in commercial products, thousand rubles. | Wages in the cost of a unit of production, thousand rubles. | ||||
| March | according to plan | actually | deviations (+,-) (gr.5-gr.4) | according to plan (gr.4:gr.3) | actually (gr.5:gr.3) | deviations (gr.8-gr.7) | ||
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
| A | PC. | 730 | 9839,7 | 9783,1 | -56,6 | 13,48 | 13,40 | -0,08 |
| B | PC. | 643 | 5412,0 | 5314,0 | -98,0 | 8,42 | 8,26 | -0,15 |
| IN | PC. | 40 | 661,2 | 674,9 | +13,7 | 16,53 | 16,87 | +0,34 |
| Other products | thousand rubles | 44,5 | 57,0 | +12,5 | ||||
| Total | 15957,4 | 15829,0 | -128,4 | |||||
The table shows that in fact the costs of workers' wages turned out to be lower than the planned value by 128.4 thousand rubles. Savings were achieved by reducing wages for products A and B. At the same time, for product B and other products, the wages of production workers exceeded the plan (by 0.34 thousand rubles per unit of product B and by 12.5 thousand rubles for all other products).
Next, it is necessary to analyze the deviation of workers' wage fund expenses as a result of changes labor intensity products. Reducing labor intensity ensures wage savings and increased labor productivity.
Table 4.3 presents the necessary data to determine the influence of labor intensity and hourly rate on wages for product B.
Table 4.3. Analysis of the impact of labor intensity.
| Indicators | Designations | Plan | Fact | Deviations from the plan (+,-) |
| Number of units of product B, pcs. | q | 643 | 643 | -- |
| Labor intensity of product unit B, standard hours | Q | 1,20 | 1,18 | -0,02 |
| Hourly rate, rub. | L | 7014 | 7004 | -10 |
| Amount of wages, thousand rubles. | U | 5412,0 | 5314,0 | -98,0 |
The influence of each factor was:
a) the influence of labor intensity
b) the impact of a change in hourly rate
Thus, wage costs for product B decreased by 98.0 thousand rubles. At the same time, by reducing the labor intensity of product production by 0.02 standard hours, wage costs decreased by 90.2 thousand rubles, and by changing the hourly rate by 10 rubles. expenses decreased by 7.8 thousand rubles.
It is advisable to carry out similar calculations for all manufactured products.
Another important reason for deviations of the actual wages of production workers from the planned ones are deviations from the established technology, recorded by special accounting documents - additional payment slips, which are grouped by places of detection, reasons and culprits.
§ 5. Analysis of complex cost items.
Complex costs are those that consist of several elements. The cost includes: the following groups complex expenses: expenses for preparation and development of production of new types of products; expenses for maintenance of production and its management (they include three items - expenses for the maintenance and operation of equipment, shop expenses, general plant (general) expenses); losses from marriage; other production costs; non-production (commercial) expenses.
Each item of comprehensive expenses includes costs of various economic natures and purposes. In accounting, they are detailed into more fractional items that combine expenses of the same purpose. Therefore, deviations from the cost estimate are determined not by the item as a whole, but by the individual items included in it. Then the amounts exceeding the plan for some items and savings for others are calculated separately. When assessing the changes obtained, it is necessary to take into account the dependence of individual expenses on the plan for production volume and the number of employees, as well as on other production conditions.
Based on their dependence on production volume, expenses are divided into those that do not depend on the degree of implementation of the plan - conditionally permanent and dependent - variables. Variable costs can also be divided into conditionally proportional, which, when the plan for production volume is exceeded, increases almost in full accordance with the percentage of fulfillment of this plan, and digressive, the growth of which to one degree or another lags behind the above-plan growth in production volume.
According to research, with minor deviations of production volume from the plan (within ±5%), workshop and general plant costs remain unchanged.
Expenses for the maintenance and operation of equipment increase when the plan for production volume is exceeded, but not proportionally, but digressively, and the rate of their growth depends on the factors that determined the above-plan growth of production. Of the individual components of these expenses, almost in proportion to the fulfillment of the plan for production volume, the item “Wear of low-value and wear-out tools and devices” increases or decreases. At the same time, expenses under the item “Depreciation of equipment and vehicles” remain unchanged.
The items “Other production expenses” and “Non-production (commercial) expenses” are also variables.
Due to the absence of certain coefficients that determine the permissible increase in the variable part of complex costs with above-plan growth in production volume, in practice, when analyzing complex cost items, variable costs are recalculated to the percentage of fulfillment of the production plan, and conditionally fixed costs are limited to the budget. However, for no item of complex expenses should deviations increase in proportion to changes in production volume: in all cases relative savings should be achieved.
According to the possibilities of influence of the enterprise itself, deviations - both overruns and savings - are divided into dependent And independent From him.
According to the nature of the reasons that caused the deviations, they differ: savings, which are and are not the merit of the enterprise; overexpenditure, unjustified and justified, which is not considered the fault of the enterprise.
5.1. Analysis of production maintenance and management costs.
The analysis of costs for production maintenance and management begins with studying the dynamics of their absolute amounts and share in the standard net production.
The study of the dynamics of absolute amounts of expenses is carried out from the point of view of determining the impact on their change of measures to strengthen the economy regime, improve production maintenance and management. Studying the dynamics of expenses is also important for checking the validity of the planned growth or reduction of individual items and expenses. The planned change in their amounts should follow from the planned change in the number of service and management personnel, the growth of the organizational and technical level of the enterprise and other business conditions affecting the size of the relevant expense items.
Table 5.1. Analysis of the dynamics of costs for production maintenance and management.
| Indicators | Last year | Reporting year | ||||
| thousand roubles. | to net production, % | plan | actually | |||
| thousand roubles. | to net production, % | thousand roubles. | to net production, % | |||
| Regulatory clean products | 64764 | 100,0% | 70800 | 100,0% | 69844 | 100,0% |
| Expenses for maintenance and operation of equipment | 11001 | 17,0% | 10716 | 15,1% | 10329 | 14,8% |
| Shop expenses | 12125 | 18,7% | 13170 | 18,6% | 12873 | 18,4% |
| General plant expenses | 17000 | 26,2% | 18420 | 26,0% | 18515 | 26,5% |
| TOTAL production and management costs | 40126 | 62,0% | 42306 | 59,8% | 41717 | 59,7% |
Analyzing the data in Table 5.1, we can say that a decrease in the level of expenses with an increase in their absolute amount indicates that the growth of expenses lags behind the growth rate of production volumes, which leads to a decrease in costs. The growth in production volume over the two years being compared led to a relative reduction in the level of costs for production maintenance and management, despite a slight increase in the absolute amount of shop floor and especially general plant expenses. However, it is necessary to find out the reasons for the underfulfillment of the plan for shop expenses, since savings could have been achieved through failure to implement labor protection measures, experiments and research, reducing the current repair of buildings and structures, etc.
The comparison allows us to establish only the general trend of changes in expenses. The individual cost items included in them depend on many factors. It is possible to identify reserves for their savings only on the basis of a detailed study of the dynamics and deviations from the plan for each article separately. It should be borne in mind that, by their nature, the costs of maintaining and operating equipment, in contrast to shop and general plant expenses, are variable. Therefore, when analyzing them, it is necessary to take into account that these costs change approximately in proportion to changes in production volume. Consequently, actual costs in this case must be compared not only with the plan for the approved production volume, but also with the recalculated estimate (Table 5.2).
Table 5.2. Item-by-item analysis of the costs of maintaining and operating equipment.| Title of articles | According to plan, thousand rubles. | Plan in terms of actual output, thousand rubles. | In fact, thousand rubles. | Deviations (+,-) (group 3-group 2), thousand rubles. |
| A | 1 | 2 | 3 | 4 |
| Depreciation of equipment and vehicles* | 2270 | 2270 | 2278 | +8 |
| Equipment operation | 1810 | 1786 | 1663 | -123 |
| Current repairs of equipment and vehicles | 1971 | 1944 | 1938 | -6 |
| In-plant movement of goods | 755 | 745 | 867 | +122 |
| Inspection of low-value and wear-out tools and devices | 1693 | 1670 | 1357 | -313 |
| other expenses | 2217 | 2187 | 2226 | +39 |
| Total expenses for the maintenance and operation of machinery and equipment for the reporting period | 10716 | 10602 | 10329 | -273 |
The table data shows that the actual costs of maintaining and operating the equipment turned out to be 273 thousand rubles, or 2.6%, compared to the plan, adjusted for changes in product output (in this case, there was a decrease in output volumes against the planned one by 1.4%). At the same time, significant deviations from the plan are observed for individual items, so it is necessary to establish specific reasons for savings or overspending on these items. (Large deviations are likely the result of unreasonable planning of these expense items.)
Analysis of costs for preparation and development of production. The main part of this expense item is associated with the development of new types of products and new technological processes and the preparation of industrial production of these products. In addition, this item in the mining industry reflects the costs of mining preparation work. All actual costs for these purposes are taken into account from the beginning as part of deferred expenses, and then are written off gradually to the cost of production based on the planned period for their full reimbursement and the planned volume of production during this period.
Expenses for preparation and development of production are divided into items related to individual production stages. In the process of analysis, it is necessary to establish for which items of the estimate there were overruns and their reasons, whether additional savings were obtained as a result of non-fulfillment of the production preparation plan or less thorough implementation, which may subsequently lead to a decrease in the efficiency of the introduction of new equipment and technology. Overexpenditures can be justified if they are compensated by an increase in the economic effect from the long-term implementation of the production and operation of a new facility.
Analysis of losses from defects. This expense item is planned as an exception only in production where it is impossible to completely prevent such losses due to hidden defects in raw materials and materials that cause defects during their processing, and for other unavoidable reasons. However, in practice, most enterprises experience losses from defects, and their elimination or at least reduction is a significant reserve for reducing production costs.
Analysis of losses from defects usually begins with a comparison of general data on the level of defects for the corresponding data for the previous period, and in enterprises where defects are planned, with the planned level.
Then the analysis is detailed by the place where the defect occurred (in which production units of the association and in which workshops), by the reasons (factors) for its occurrence, and by the culprits. The degree of compensation for losses from marriage by the perpetrators is considered.
The dynamics of the relationship between the costs of final defects and correction of defects should be studied. The higher the proportion of final defects, the worse the inter-operational and inter-shop quality control of parts and semi-finished products is at the enterprise.
Non-production expenses. These include all costs for packaging, its delivery to the destination station, loading, as well as other sales costs. These costs depend on the volume of products shipped, i.e. they are variable. Adjustment of estimates for them should be carried out based on changes natural shipment volume, since packaging and shipping costs are proportional to the weight and dimensions of the product, and not their cost.
When calculating reserves for reducing non-production expenses, one must strive to identify as fully as possible the overexpenditures for individual types of these expenses, avoiding their balancing with cost savings for other purposes.
Annex 1. Estimated data for table 2.1 "Costs per ruble of marketable products."
| product name | Number of products (items), pcs. | Cost per unit of product, thousand rubles. | Wholesale price per unit of product, thousand rubles. | Change prices and tariffs for materials. | Estimated indicators for table 2.1. "Costs per ruble of commercial products", thousand rubles. | |||||||||
| according to plan qp | actual qf | according to plan SP | actual Sф | according to plan SP | actual Cf | resources, thousand rubles | S qпSп | S qфSp | S qфSф | S qfS"f* | S qпСп | S qfSp | S qфСф | |
| Vacuum cleaner | 63 | 60 | 1013 | 999 | 1267 | 1313 | +34 | 63819 | 60780 | 59940 | 57900 | 79821 | 76020 | 78780 |
| Fridge | 61 | 61 | 1903 | 1911 | 2199 | 2199 | +41 | 116083 | 116083 | 116571 | 114070 | 134139 | 134139 | 134139 |
| Coffee maker | 95 | 35 | 113 | 108 | 177 | 180 | -2 | 10735 | 3955 | 3780 | 3850 | 16815 | 6195 | 6300 |
| Iron | 114 | 128 | 78 | 65 | 94 | 107 | +3 | 8892 | 9984 | 8320 | 7936 | 10716 | 12032 | 13696 |
| Telephone | 175 | 153 | 23 | 23 | 49 | 28 | -1 | 4025 | 3519 | 3519 | 3672 | 8575 | 7497 | 4284 |
| Total: | 508 | 437 | 203554 | 194321 | 192130 | 187428 | 250066 | 235883 | 237199 | |||||
- Basic provisions for planning, accounting and calculating the cost of production at industrial enterprises (approved by the State Planning Committee of the USSR, the Ministry of Finance of the USSR, the State Committee for Prices of the USSR, the Central Statistical Office of the USSR on July 20, 1970).
- Regulations on the composition of costs for the production and sale of products (works, services), included in the cost of production (works, services), and on the procedure for the formation of financial results taken into account when taxing profits (approved by a government resolution Russian Federation dated August 5, 1992 No. 552; with amendments and additions approved by the Government of the Russian Federation dated July 1, 1995 No. 661 and November 20, 1995 No. 1133).
- Analysis of financial and economic activities of enterprises. Ed. L. Korotkova and R. Medvedev. - M.: Gosfinizdat, 1963 - 357 p.
- Analysis of economic activity in industry: Textbook / L.A. Bogdanovskaya, G.G. Vinogorov, O.F. Migun et al.: Under general. ed. IN AND. Strazheva. - Minsk: Vys. school, 1995. - 363 p.
- Business analysis course. Ed. prof. S.K. Tatura and prof. A. D. Sheremeta. - M.: “Economics”, 1974 - 399 p.
- Course of economic analysis: Proc. for economical specialist. universities Ed. M. I. Bakanova, A. D. Sheremeta. - M.: Finance and Statistics, 1984 - 412 p.
- Methodology for economic analysis of the activities of a production association. Ed. A. I. Buzhinsky and A. D. Sheremet. - M.: Finance, 1978 - 224 p.
- The theory of economic activity analysis: Textbook. - 2nd ed., revised. and additional - M.: Finance and Statistics, 1987. - 287 p.
- Sheremet A.D., Saifulin R.S. Methodology for comprehensive analysis of economic activity. - M.: “Economy”, 1980 - 232 p.
- Economic analysis of economic activity. Ed. A. D. Sheremeta - M.: “Economics”, 1979 - 373 p.
- Economic analysis of economic activities of enterprises and associations: Textbook / Ed. S. B. Barngolts and G. M. Tatsia. - 3rd ed. reworked and additional - M.: Finance and Statistics, 1986 - 407 p.
Calculating the cost of production is a complex calculation procedure. In an enterprise, this is the responsibility of accountants, who must calculate expected income, taking into account all possible costs of the enterprise.
Product cost - main definitions
Cost is the current expenses of an enterprise, expressed in monetary form, aimed at the production and sale of goods.
Cost is an economic category that reflects the production and economic activities of a company and shows how much financial resources are spent on the manufacture and sale of products. The profit of the enterprise directly depends on the cost, and the lower it is, the higher the profitability.
Types and types of cost
The cost is:
- Full (medium)– implies the totality of all expenses; commercial costs for the manufacture of products and the purchase of equipment are also taken into account.
The costs of creating a business are usually divided into periods during which they must be repaid. Gradually, in equal shares, they are added to general production costs. In this way, the average cost per unit of production is formed. - Limit– is directly dependent on the quantity of goods produced and reflects the cost of each additional unit of production. Shows how effective further expansion of production will be.
The type of cost depends on what area of the business the owner wants to control:
What is the cost structure
The cost consists of the following items:
- Raw materials which is necessary for production.
- Some businesses require calculation energy resources(various types of fuel).
- Expenses for equipment and machinery necessary for the functioning of the enterprise.
- Staff salaries, as well as payment of all payments and taxes.
- General production expenses(office rent, advertising, etc.).
- Expenses for social events.
- Costs associated with depreciation fixed assets.
- Administrative expenses.
- Payment for the activities of third parties.
Also, when calculating the cost, it is customary to take into account production costs.
Production volume and cost: is there a connection?
The cost of production directly depends on the quantity of goods produced.
Let’s say you need to purchase a package of tea that costs 50 rubles.
The journey to the store takes half an hour.
Your expenses will be:
- We’ll value an hour of your time at 60 rubles;
- Your travel expenses will be 15 rubles.
The ownership formula is:
Cost = (price of goods + expenses) / (quantity of goods purchased) = (60 + 50 + 15) / 1 = 125 rubles
If you decide to purchase 4 packs of tea, then the cost of the product will be (4 * 50 + 60 + 15) / 4 = 68.75 rubles
The more products you purchase, the lower the cost, which, in turn, reduces the selling price of the product.
Thus, due to the large volume of products, larger firms may not be afraid of competition from such strong enterprises.
Methods for forming production costs
The most common way to determine cost is the calculation method, with which it is possible to calculate the cost of producing a unit of sold products.
It is best to calculate using the comparable controlled price method, which is set based on the cost of services provided by competing firms.
Classification of expenses
The classification of costs is based on the assigned task related to business management (calculate the cost and profit of products sold, and so on). 
- By adding the cost of the finished product to the cost, all expenses are usually divided into two types:
- Direct- those that are added in an exact or single way to the cost of goods manufactured by the company. Often these are the costs of necessary raw materials and supplies, and workers' wages.
- Indirect– represent overhead costs and relate to the costing object by the distribution method according to the methodology established at the enterprise.
These include the following costs:
- Commercial;
- General economic;
- General production.
- Depending on the volume of products produced, costs are:
- Permanent- costs that do not depend on the volume of goods produced, but they are indicated per unit of production and change with the level of business activity.
- Variables– costs that are influenced by production or sales volume. A unit of production does not change the amount of costs.
- According to significance for a particular case, costs are:
- Relevant– costs depending on the decisions made.
- Irrelevant– costs that are not related to the decisions made.
Cost calculation methods
There are several different ways calculating the cost of goods. They are used depending on the nature of the work, services or products produced.
- Completeness of adding expenses to the cost price.
There are two types of production costs:
- Full– all expenses of the enterprise are taken into account.
- Truncated- refers to the unit cost of variable costs.
Constant part of the total production costs and other expenses are written off to reduce profits at the end of the established period without distribution to the goods produced.
With this calculation method, the cost is influenced by both variable and fixed costs. The price is calculated by adding the required profitability to the cost.
- Actual and standard costs are calculated based on expenses incurred by the enterprise. Standard cost makes it possible to keep under control the costs of various resources and, in case of deviation from the norm, take all necessary actions in a timely manner.
The actual cost per unit of manufactured goods is determined after calculating all costs.
The method is characterized by its low efficiency.
- Depending on the object of cost accounting, the following methods are distinguished:
- Transverse– used by enterprises of serial and flow production, when during the manufacturing process the product goes through several stages of processing.
- Process-by-process- is typical for the mining industry.
Formation of cost at the enterprise
Determining the cost of manufactured products is the task of an accountant. This process is very important and complex. In this case, it is customary to divide costs into direct and indirect.
There are expenses that are indicated as direct in accounting, but as indirect in tax accounting.
All expenses for the production of products and their sales are included in the cost price. Expenses related to taxation are usually rationed.
Cost grouping
To prepare an accounting report, it is necessary to group expenses by economic elements:
- Material costs;
- Payments of social needs;
- Employees' salaries;
- Other expenses (payments, contributions to insurance funds).
When calculating costing, they use grouping of costs by costing items, due to which the cost of a unit of output is calculated.
- Expenses for production materials and services;
- Employees' salaries;
- Costs of preparing production for operation;
- General production and general business expenses;
- Production costs;
- Other expenses.
Cost: formula for calculating total cost
Cost is the sum of all costs of production.
In order to get the full cost of a product or service, you need to add up all the costs associated with production and sales.
To do this, use the formula:
PS = PRS + RR
- Production cost of the product PRS calculated based on production costs (depreciation, wages, material costs, social benefits).
- Costs of selling goods RR(packaging, storage, transportation, advertising).
Unit cost of production calculation formula
Enterprises that produce only one type of product can calculate the cost per unit of manufactured goods using a simple calculation method.
The price per unit of manufactured goods is determined by dividing the sum of all expenses for a specified period by the number of products manufactured during this time.
Product cost calculation excel formulas
Exist special programs Excel, with the help of which it is possible to calculate the cost of production. You enter the required data and receive Excel formulas.
Your task is to enter all the numbers correctly; the program will carry out all the calculations automatically and according to all the rules. All indicators are calculated using formulas. Data processing does not take much time.
Positive aspects of the program:
- The program works in different modes (automatic and manual);
- Correct work with “Returnable waste”;
- Suitable for medium and small businesses.
- Negative aspects of the program:
- Limited amount of information processed;
- Support for only one resource type specification is available.
Cost shows how much it cost the company to manufacture the product. It has a certain structure and is calculated using formulas.
In production, accountants are involved in calculating costs, selecting a suitable method for this.
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