Consider variable costs enterprises, what they include, how they are calculated and determined in practice, we will consider methods for analyzing the variable costs of an enterprise, the effect of changing variable costs with different volumes of production and their economic meaning. In order to understand all this simply, at the end, an example of variable cost analysis based on the break-even point model is analyzed.

Variable costs of the enterprise. Definition and their economic meaning

Enterprise variable costs (Englishvariablecost,VC) are the costs of the enterprise/company, which vary depending on the volume of production/sales. All costs of the enterprise can be divided into two types: variable and fixed. Their main difference lies in the fact that some change with an increase in production, while others do not. If a production activity company ceases, then variable costs disappear and become equal to zero.

Variable costs include:

• The cost of raw materials, materials, fuel, electricity and other resources involved in production activities.
• The cost of manufactured products.
• Wages of working personnel (part of the salary depending on the fulfilled norms).
• Percentage of sales to sales managers and other bonuses. Interest paid to outsourcing companies.
• Taxes that have a tax base of the size of sales and sales: excises, VAT, UST from premiums, tax on the simplified tax system.

What is the purpose of calculating enterprise variable costs?

Behind any economic indicator, coefficient and concept one should see their economic meaning and the purpose of their use. If we talk about the economic goals of any enterprise / company, then there are only two of them: either an increase in income or a decrease in costs. If we generalize these two goals into one indicator, we get - the profitability / profitability of the enterprise. The higher the profitability of an enterprise, the greater its financial reliability, the greater the opportunity to attract additional borrowed capital, expand its production and technical capacities, increase its intellectual capital, increase its market value and investment attractiveness.

The classification of enterprise costs into fixed and variable is used for management accounting, and not for accounting. As a result, there is no such stock as "variable costs" in the balance sheet.

Determining the amount of variable costs in the overall structure of all costs of the enterprise allows you to analyze and consider various management strategies increase the profitability of the enterprise.

Amendments to the definition of variable costs

When we introduced the definition of variable costs / costs, we were based on a model of linear dependence of variable costs and production volume. In practice, often variable costs do not always depend on the size of sales and output, therefore they are called conditionally variable (for example, the introduction of automation of a part production functions and due to the decrease wages for the rate of production of production personnel).

The situation is similar with fixed costs, in reality they are also conditionally constant, and can change with the growth of production (an increase in rent for production premises, a change in the number of personnel and a consequence of the volume of wages. More details about fixed costs you can read in detail in my article: "".

Classification of enterprise variable costs

In order to better understand how to understand what variable costs are, consider the classification of variable costs according to various criteria:

Depending on the size of sales and production:

• proportionate costs. Elasticity coefficient =1. Variable costs increase in direct proportion to the increase in output. For example, the volume of production increased by 30% and the amount of costs also increased by 30%.
• Progressive costs (similar to progressive variable costs). Elasticity coefficient >1. Variable costs are highly sensitive to changes depending on the size of output. That is, variable costs increase relatively more with output. For example, the volume of production increased by 30%, and the amount of costs by 50%.
• Degressive costs (similar to regressive variable costs). Elasticity coefficient< 1. При увеличении роста производства переменные издержки предприятия уменьшаются. Данный эффект получил название – “эффект масштаба” или “эффект массового производства”. Так, например, объем производства вырос на 30%, а при этом размер переменных издержек увеличился только на 15%.

The table shows an example of changing the volume of production and the size of variable costs for their various types.

According to the statistical indicator, there are:

• General variable costs ( EnglishTotalvariablecost,TVC) - will include the totality of all variable costs of the enterprise for the entire range of products.
• Average variable costs (English AVC, Averagevariablecost) - average variable costs per unit of production or group of goods.

According to the method of financial accounting and attribution to the cost of manufactured products:

• Variable direct costs are costs that can be attributed to the cost of production. Everything is simple here, these are the costs of materials, fuel, energy, wages, etc.
• Variable indirect costs are costs that depend on the volume of production and it is difficult to assess their contribution to the cost of production. For example, during the production separation of milk into skimmed milk and cream. It is problematic to determine the amount of costs in the cost of skimmed milk and cream.

In relation to the production process:

• Production variable costs - the cost of raw materials, materials, fuel, energy, wages of workers, etc.
• Non-manufacturing variable costs - costs not directly related to production: selling and management costs, for example: transportation costs, commission to an intermediary / agent.

Variable Cost/Cost Formula

As a result, you can write a formula for calculating variable costs:

Variable costs = Cost of raw materials + Materials + Electricity + Fuel + Bonus part of Salary + Percentage of sales to agents;

variable costs\u003d Marginal (gross) profit - Fixed costs;

The totality of variable and fixed costs and constants make up the total costs of the enterprise.

General costs= Fixed costs + Variable costs.

The figure shows a graphical relationship between the costs of the enterprise.

How to reduce variable costs?

One strategy to reduce variable costs is to use economies of scale. With an increase in the volume of production and the transition from serial to mass production, economies of scale appear.

scale effect graph shows that with an increase in production, a turning point is reached, when the relationship between the size of costs and the volume of production becomes non-linear.

At the same time, the rate of change of variable costs is lower than the growth of production/sales. Consider the causes of the “scale effect of production”:

1. Reducing the cost of management personnel.
2. The use of R&D in the production of products. The increase in output and sales leads to the possibility of costly research research work to improve production technology.
3. Narrow product specialization. Focusing the entire production complex on a number of tasks can improve their quality and reduce the amount of scrap.
4. Release of products similar in the technological chain, additional capacity utilization.

Variable costs and the break-even point. Calculation example in Excel

Consider the break-even point model and the role of variable costs. The figure below shows the relationship between changes in production volume and the size of variable, fixed and total costs. Variable costs are included in total costs and directly determine the break-even point. More

When the enterprise reaches a certain volume of production, an equilibrium point occurs at which the amount of profit and loss coincides, net profit is equal to zero, and contribution margin equals fixed costs. This point is called breakeven point, and it shows the minimum critical level of production at which the enterprise is profitable. In the figure and the calculation table below, it is achieved by producing and selling 8 units. products.

The task of the enterprise is to create security zone and ensure that the level of sales and production that would ensure the maximum distance from the break-even point. The further the company is from the break-even point, the higher the level of its financial stability, competitiveness and profitability.

Consider an example of what happens to the break-even point as variable costs increase. The table below shows an example of a change in all indicators of income and expenses of the enterprise.

As variable costs increase, the break-even point shifts. The figure below shows a schedule for reaching the break-even point in a situation where the variable costs for the production of one unit of the product became not 50 rubles, but 60 rubles. As we can see, the break-even point began to equal 16 units of sales / sales, or 960 rubles. income.

This model, as a rule, operates with linear dependencies between the volume of production and income/costs. In real practice, dependencies are often non-linear. This arises due to the fact that the volume of production / sales is affected by: technology, seasonality of demand, the influence of competitors, macroeconomic indicators, taxes, subsidies, economies of scale, etc. To ensure the accuracy of the model, it should be used in short term for products with stable demand (consumption).

Summary

In this article, we examined various aspects of the variable costs / costs of the enterprise, what forms them, what types of them exist, how changes in variable costs and changes in the break-even point are related. Variable costs are the most important indicator enterprises in management accounting, to create planning targets for departments and managers to find ways to reduce their weight in total costs. To reduce variable costs, you can increase the specialization of production; expand the range of products using the same production capacity; increase the share of research and production developments to improve the efficiency and quality of output.

The variety of ways to make a profit for enterprises in any industry of production and sale of services, on the one hand, creates unlimited opportunities for the development of a particular business, on the other hand, each type of activity has a certain threshold of efficiency, determined by break-even.

In turn, the amount of revenue that guarantees a profit directly depends on the total costs of production and sale of products.

What it is?

The total expenses of the enterprise for the purpose of analyzing the break-even activity are usually divided into two main categories:

• - costs, the amount of which directly depends on the volume of production and sale of services (depending on the chosen direction of the company's operation), i.e., in fact, are directly proportional to any fluctuations in the volume of core activities carried out;
• fixed - these are costs, the amount of which does not change in the medium term (a year or more) and does not depend on the volume of the company's core activities, i.e. they will exist even if the activity is suspended or terminated.

Having considered fixed costs on the example of an enterprise, it is easier to understand their essence and interdependence with the volume of core activities.

So, they include the following items of expenditure:

• depreciation charges on fixed assets of the company;
• rent, tax payments to the budget, contributions to off-budget funds;
• bank expenses for servicing current accounts, loans of the organization;
• wage fund administrative management personnel;
• other general business expenses necessary to ensure the normal functioning of the enterprise.

Thus, the essence of the fixed costs of any organization is reduced to their functional necessity for the implementation of activities. They can and most often change over time, but the reason for this is external factors(changes in the tax burden, adjustment of bank service conditions, renegotiation of contracts with service organizations, change of tariffs for utilities etc.).

Internal factors affecting the change in fixed costs are significant change corporate policy, personnel remuneration system, a significant change in the volume or direction of the company's activities (not just a change in volume, but a radical transition to a new level).

Under the influence of all these factors, there is a change in fixed costs, usually they are characterized by sharp fluctuations in the amount of expenses.

For the purposes of accounting and analysis, the expenses of an enterprise are usually divided into fixed and variable, using the following methods:

• Based on experience and knowledge, through managerial decision expenses are assigned to a certain category. This method good when the company is just starting its activities and there are simply no other ways to allocate costs. It is characterized by a high level of subjectivity and requires revision in the long term.
• Based on the data of the analytical work carried out on the search, evaluation and differentiation of all expenses by categories based on their behavior under the influence of the factor of changes in the volume of core activities. It is the most acceptable, since this method is more objective.

For information on which of the expenses to which group you need to determine, see the following video:

How to calculate them?

Fixed costs are calculated using the formula:

POSTz \u003d W salary + W rent + W banking services + Depreciation + Taxes + General Household, where:

• POSTz - fixed costs;
• W salary - the cost of salaries of administrative and managerial personnel;
• R rent - rental expenses;
• 3 banking services - banking services;
• General economic expenses - other general economic expenses.

To find the indicator of average fixed costs per unit of output, it is necessary to apply the following formula:

SrPOSTz \u003d POSTz / Q, where:

• Q - the volume of output (its quantity).

The analysis of these indicators must be carried out in dynamics, evaluating the retrospective of values ​​at different time intervals, including with joint analysis and other economic indicators. This will allow you to see the relationship of processes specific to the enterprise, which means you can get a cost management tool in the future.

economic sense

Fixed cost analysis, performed both on an operational basis and for the purpose of strategic planning, allows you to assess the ability of the enterprise to improve the efficiency of its activities. This is the key economic meaning of this category.

The simplest and affordable way analysis of the effectiveness of the company's activity is an assessment of the break-even point indicator, including in dynamics. For calculations, data on the amount of fixed costs, unit price and average variable costs are required:

Tb \u003d POSTz / (Ts1 - SrPEREMz), where:

• Tb - breakeven point;
• POSTz - fixed expenses;
• C1 - price per unit. products;
• Avperemz - average variable costs per unit of output.

The break-even point is an indicator that allows you to see the boundary beyond which the company's activities begin to make a profit, as well as analyze the dynamics of the impact of changes in costs on the volume of production and profit of the organization. The decrease in the break-even point at constant variable costs is positively assessed, this signals an increase in the efficiency of the enterprise's expenses. The growth of the indicator should be assessed positively when it occurs against the background of an increase in sales volumes, that is, it indicates an increase and expansion of the scope of activities.

Thus, accounting, analysis and control of fixed costs, reducing their load per unit of output are mandatory measures necessary for each enterprise to achieve competent resource and capital management.

short term - this is the period of time during which some factors of production are constant, while others are variable.

Fixed factors include fixed assets, the number of firms operating in the industry. In this period, the company has the opportunity to vary only the degree of utilization of production capacities.

Long term is the length of time during which all factors are variable. AT long term the firm has the ability to change the overall dimensions of buildings, structures, the amount of equipment, and the industry - the number of firms operating in it.

fixed costs ( FC ) - these are costs, the value of which in the short run does not change with an increase or decrease in the volume of production.

Fixed costs include costs associated with the use of buildings and structures, machinery and production equipment, rent, overhaul as well as administrative costs.

Because As production increases, total revenue increases, then average fixed costs (AFC) are a decreasing value.

variable costs ( VC ) - These are costs, the value of which varies depending on the increase or decrease in the volume of production.

Variable costs include the cost of raw materials, electricity, auxiliary materials, labor costs.

Average Variable Costs (AVC) are:

Total costs ( TC ) - a set of fixed and variable costs of the company.

Total costs are a function of the output produced:

TC = f(Q), TC = FC + VC.

Graphically, the total costs are obtained by summing the curves of fixed and variable costs (Figure 6.1).

The average total cost is: ATC = TC/Q or AFC +AVC = (FC + VC)/Q.

Graphically, ATC can be obtained by summing the AFC and AVC curves.

marginal cost ( MC ) is the increase in total cost due to an infinitesimal increase in production. Marginal cost is usually understood as the cost associated with the production of an additional unit of output.

Production costs - the cost of purchasing economic resources consumed in the process of issuing certain goods.

Any production of goods and services, as you know, is associated with the use of labor, capital and natural resources, which are factors of production whose value is determined by production costs.

Due to the limited resources, the problem arises of how best to use them from all the rejected alternatives.

Opportunity costs are the costs of issuing goods, determined by the cost of the best lost opportunity to use production resources, ensuring maximum profit. The opportunity cost of a business is called economic cost. These costs must be distinguished from accounting costs.

Accounting costs differ from economic costs in that they do not include the cost of factors of production owned by firm owners. Accounting costs are less than economic costs by the amount of implicit earnings of the entrepreneur, his wife, implicit ground rent and implicit interest on the equity of the owner of the firm. In other words, accounting costs are equal to economic costs minus all implicit costs.

Variants of classification of production costs are diverse. Let's start by distinguishing between explicit and implicit costs.

Explicit costs are opportunity costs that take the form of cash payments to owners of production resources and semi-finished products. They are determined by the amount of the company's expenses to pay for the purchased resources (raw materials, materials, fuel, labor, etc.).

Implicit (imputed) costs are the opportunity costs of using resources that are owned by the firm and take the form of lost income from the use of resources owned by the firm. They are determined by the cost of resources owned by the firm.

The classification of production costs can be carried out taking into account the mobility of production factors. There are fixed, variable and general costs.

Fixed costs (FC) - costs, the value of which in the short period does not change depending on changes in the volume of production. These are sometimes referred to as "overhead costs" or "sunk costs". Fixed costs include the costs of maintaining production buildings, purchasing equipment, rent payments, interest payments on debts, salaries of management personnel, etc. All these costs must be financed even when the company does not produce anything.

Variable costs (VC) - costs, the value of which varies depending on changes in the volume of production. If production is not produced, then they are equal to zero. Variable costs include the cost of purchasing raw materials, fuel, energy, transportation services, salaries of workers and employees, etc. In supermarkets, the payment for the services of supervisors is included in variable costs, since managers can adjust the volume of these services to the number of buyers.

Total Costs (TC) - total costs firms, equal to the sum of its fixed and variable costs, are determined by the formula:

Total costs increase as the volume of production increases.

The costs per unit of goods produced are in the form of average fixed costs, average variable costs, and average total costs.

Average fixed cost (AFC) is the total fixed cost per unit of output. They are determined by dividing fixed costs (FC) by the corresponding quantity (volume) of output:

Since total fixed costs do not change, when divided by an increasing volume of production, average fixed costs will fall as the quantity of output increases, since a fixed amount of costs is distributed over more and more units of production. Conversely, if output decreases, average fixed costs will increase.

Average variable cost (AVC) is the total variable cost per unit of output. They are determined by dividing the variable costs by the corresponding amount of output:

Average variable costs first fall, reaching their minimum, then begin to rise.

Average (total) costs (ATS) are the total costs of production per unit of output. They are defined in two ways:

a) by dividing the sum of total costs by the quantity of goods produced:

b) by summing average fixed costs and average variable costs:

ATC = AFC + AVC.

Initially, the average (total) cost is high because the output is small and the fixed costs are high. As the volume of production increases, average (total) costs decrease and reach a minimum, and then begin to rise.

Marginal cost (MC) is the cost associated with producing an additional unit of output.

Marginal cost is equal to the change in total costs divided by the change in the volume of output, that is, they reflect the change in costs depending on the amount of output. Since fixed costs do not change, fixed marginal costs are always zero, i.e. MFC = 0. Therefore, marginal costs are always marginal variable costs, i.e. MVC = MC. It follows from this that increasing returns to variable factors reduce marginal costs, while falling returns, on the contrary, increase them.

Marginal cost shows the amount of costs that the firm will incur if the production of the last unit of output increases, or the money that it saves if production decreases by this unit. If the incremental cost of producing each additional unit of output is less than the average cost of the units already produced, the production of that next unit will lower the average total cost. If the cost of the next additional unit is higher than the average cost, its production will increase the average total cost. The foregoing refers to a short period.

In the practice of Russian enterprises and in statistics, the concept of "cost" is used, which means monetary value current costs of production and sales of products. The composition of the costs included in the cost includes the cost of materials, overhead, wages, depreciation, etc. There are the following types of cost: basic - the cost of the previous period; individual - the amount of production costs specific type products; transportation - the cost of transporting goods (products); of sold products, current - assessment of sold products at the restored cost; technological - the amount of costs for the organization technological process production of products and provision of services; actual - based on the data of actual costs for all cost items for a given period.

G.C. Vechkanov, G.R. Bechkanova

The manual is presented on the website in an abbreviated version. In this version, tests are not given, only selected tasks and high-quality tasks are given, theoretical materials are cut by 30% -50%. I use the full version of the manual in the classroom with my students. The content contained in this manual is copyrighted. Attempts to copy and use it without indicating links to the author will be prosecuted in accordance with the legislation of the Russian Federation and the policy of search engines (see the provisions on the copyright policy of Yandex and Google).

10.11 Types of costs

When we considered the periods of production of a firm, we talked about the fact that in the short run the firm may not change all the factors of production used, while in the long run all factors are variable.

It is these differences in the ability to change the volume of resources with a change in the volume of production that led economists to break down all types of costs into two categories:

1. fixed costs;
2. variable costs.

fixed costs(FC, fixed cost) - these are those costs that cannot be changed in the short run, and therefore they remain the same with small changes in the volume of production of goods or services. Fixed costs include, for example, rent for premises, costs associated with the maintenance of equipment, repayment of previously received loans, as well as various administrative and other overhead costs. For example, it is impossible to build a new oil refinery within a month. Therefore, if an oil company plans to produce 5% more gasoline next month, then this is possible only at existing production facilities and with existing equipment. In this case, a 5% increase in output will not lead to an increase in the cost of equipment maintenance and maintenance of production facilities. These costs will remain constant. Only the amounts of wages paid, as well as the costs of materials and electricity (variable costs) will change.

The fixed cost schedule is a horizontal straight line.

Average fixed costs (AFC, average fixed cost) are fixed costs per unit of output.

variable costs(VC, variable cost) are those costs that can be changed in the short term, and therefore they grow (decrease) with any increase (decrease) in production volumes. This category includes costs for materials, energy, components, wages.

Variable costs show such dynamics from the volume of production: up to a certain point they increase at a killing pace, then they begin to increase at an increasing pace.

The variable cost schedule looks like this:

Average variable cost (AVC) is the variable cost per unit of output.

The standard Average Variable Cost Chart looks like a parabola.

The sum of fixed costs and variable costs is total cost (TC, total cost)

TC=VC+FC

Average total cost (AC, average cost) is the total cost per unit of output.

Also, average total costs are equal to the sum of average fixed and average variables.

AC = AFC + AVC

AC graph looks like a parabola

A special place in economic analysis occupy marginal cost. Marginal cost is important because economic decisions usually involve marginal analysis of available alternatives.

Marginal cost (MC) is the incremental cost of producing an additional unit of output.

Since fixed costs do not affect the increment in total costs, marginal cost is also an increment in variable costs when an additional unit of output is produced.

As we have already said, formulas with a derivative in economic tasks are used when smooth functions are given, from which it is possible to calculate derivatives. When we are given separate points (discrete case), then we should use formulas with ratios of increments.

Schedule marginal cost is also a parabola.

Let's plot the marginal cost graph together with the graphs of average variables and average total costs:

In the above graph, you can see that AC always exceeds AVC because AC = AVC + AFC, but the distance between them gets smaller as Q increases (because AFC is a monotonically decreasing function).

You can also see on the chart that the MC chart crosses the AVC and AC charts at their lows. To substantiate why this is so, it suffices to recall the relationship between the average and limit values ​​already familiar to us (from the “Products” section): when limit value below the average, then the average value decreases with an increase in volume. When the limit value is higher than the average value, the average value increases as the volume increases. Thus, when the limit value crosses the mean value from the bottom up, the mean value reaches a minimum.

Now let's try to correlate the graphs of the general, average, and limit values:

These graphs show the following patterns.