How to determine variable costs on the balance sheet. What do variable costs include (formula)? Company information

In the era of a market economy and capitalism, every enterprise, regardless of its scale and scope of activity, strives to maximize profits. At the same time, it is important to reduce and do this without compromising quality. And if the increase in profit is mostly associated with external factors, then the reduction in production costs is a criterion that depends on production efficiency, that is, internal factors are involved here. To reduce production costs, it is necessary to reduce production costs. So what is it?

Costs are for creating products. To produce output, a company must first obtain factors of production, which incurs costs.

The determining factor for the distribution of expenses is their maintenance. Depending on the type of enterprise, its scale and localization, the same payments can be both fixed and variable costs.

Fixed costs

These are those costs that remain relatively unchanged over a long period of time (the so-called budget period is taken into account). Such costs do not depend in any way on the volume of output, sales volumes and even though many people use the word “fixed” to mean a fixed price, this is not the case; “permanent” in this context are those that are paid regularly rather than as a one-off payment.

Such costs, by definition, cannot have a fixed price, since there are third-party factors: inflation, changes in legislation, price increases, etc. Therefore, the cost of rent for a company with 100 people will not remain the same as for a company with 1,000 employees, but the rent itself will be classified as a fixed cost, since it must be paid every month.

In addition, fixed costs include:

wages
social payments
loan payments
advertising and promotion costs on social networks
depreciation, etc.

Variable costs

Unlike fixed costs, these are expenses that change in direct proportion to changes in sales. may change, and at the same time variable costs also change.

Variable costs include:

Purchase cost of raw materials and equipment
Delivery of raw materials
Energy resources
Salaries of employees working on a piecework basis
Tools and components, etc.

Opportunity Cost

In addition to their relationship to the production process, costs are considered in relation to the cost estimation method. From this point of view, one more type of costs can be identified, which is called “opportunity costs”.

In the broadest sense of the word, opportunity costs refer to the lost benefits that the company could have received if it had chosen a different way to use resources.

For example: a company owns real estate and uses this real estate for production. If we assume that instead of production, the company could organize services, for example, dry cleaning or laundry, then the costs of maintaining the dry cleaning will be just the opportunity costs.

Calculating opportunity costs is necessary to assess the profitability of an enterprise in order to understand which area to choose for an entrepreneur.

Other types of costs

In addition to variables, there are several other types of costs classified according to economic criteria. These include effective and ineffective, relevant and irrelevant, direct and indirect costs.

Effective and ineffective costs

As the name suggests, effective costs are those that will entail a certain economic effect, that is, they relate to the income that the company will receive. The enterprise's income will grow due to the growth in the volume of products, for which the above-mentioned costs were allocated. There is another type - ineffective costs, which are in no way related to making a profit and do not entail economic benefits.

Ineffective costs include those that arise for the following reasons:

Stagnation of production
A certain percentage
Theft or shortage of supplies
Damage and other defects

The company must constantly strive to reduce ineffective costs.

Relevant and irrelevant costs

Any manager of an enterprise or must control the main technological and production processes of the enterprise. The decisions of the manager directly determine whether the company will make a profit or incur losses. In this regard, it is possible to isolate relevant and irrelevant costs.

Relevant costs are those that the manager can influence, while nothing can be done about irrelevant costs. So, for example, costs from previous years will be irrelevant, since there is obviously no way to change them. An example of relevant costs is opportunity costs; managers should also pay primary attention to them. The lower the opportunity costs, the more effective the managerial work of the manager, general director or top manager will be.

Direct and indirect costs

Direct are those that directly relate to a specific product, product or service. Indirect ones are not directly related to certain products. Indirect costs include funds spent on maintaining the divisions of the enterprise. Moreover, the interesting thing is that if a company produces only one product, then it will not have indirect costs.

Procedure for calculating costs

To reflect costs in numerical terms, they need to be calculated. The specific calculation scheme depends on the profile of the enterprise, but all these methods have common features. Most often, the monetary expression of costs is reflected in the cost of production. In a broad sense, the cost of production is the costs that an enterprise incurs to produce and sell products. The cost usually includes wages of the AUP and workers, overhead costs, etc.

There are several types of cost, among which are:

Basic. The base cost is the cost of the previous period and is often used for price indexation.
Factual. It represents the totality of costs for all expense items, calculated in the current period.

Numerical costs are taken from the estimate or.
Marginal cost shows the increase in additional costs in order to produce one additional unit of output.

Calculation of break-even point.
Margin of financial strength.
Profitability of individual types of products.
Leverage (production leverage). Using leverage is calculated.
The minimum possible amount of costs (critical costs).

How are costs reflected on the balance sheet?

Production costs are reflected in (Form No. 2). It is worth remembering that the balance sheet does not contain data on the costs of the enterprise, which means these costs (fixed and variable) will be reflected in the form of assets and liabilities of the enterprise.

In the Profit and Loss Statement, costs are displayed in the “Expenses” section, and in a simplified form, management and commercial costs are combined into one line, and in a general form, they are differentiated. These costs are debited to account 90, written off from account 26 (administrative expenses), from account 41 (goods), from account 43 (finished products), from account 44 (commercial expenses), from account 20 (main production), etc.

Typical accounts used for costing include:

Auxiliary materials
Preparation costs
Insurance premiums
General production expenses
Selling expenses
General expenses
Fuel and energy
Depreciation
Salary, etc.

Ways to reduce costs

First you need to get acquainted with the concept of the financial cycle. The financial cycle for any company is the period of time between the moment payments are made to suppliers and the moment when funds from customers and buyers begin to flow into the company’s account.

Many companies are faced with such situations when the product is produced, finished, but funds from buyers have not yet arrived - then the company is forced to resort to the use of borrowed funds. To avoid this, it is recommended to constantly look for opportunities to reduce costs. Cost minimization usually consists of three main stages:

Distribution of costs into specific categories.
Highlighting costs that can be adjusted.
Financial planning and cost reduction.

Assuming that the first step is completed and the costs are categorized, you can immediately proceed to the next step.

Costs can only be reduced by reducing such expense items as:

Costs aimed at purchasing raw materials and equipment. In this case, you can resort to an attempt to revise the terms of contracts with suppliers, search for new contractors, produce previously purchased components in-house, and introduce new technological developments.
Rent. You can always find an opportunity to renegotiate between two legal entities. This could be sublease, preferential payment terms, or a change in location (for example, moving to another building).
Equipment maintenance. If possible, the repair work can be postponed for now or you can find another contractor with more favorable conditions. It may be worth carrying out the repairs yourself, without the help of third parties.
. You can reduce transportation costs by reducing official transport, outsourcing some operations, and inviting an experienced cost optimization consultant.

Examples

The ABC company is engaged in the production of shoes and produces 100 pairs of shoes per month. To operate, they rent industrial premises, which they need for their work. The ABC company also took out a bank loan at 19% per annum to expand production. What costs will the company bear?

As already written above, all costs can be divided into two main types: constant and variable, so which of them will belong to which category.

Fixed costs of the ABC company:

Payment of interest on the loan. Since the company has entered into an agreement with the bank, the agreement clearly states the amount that the company must pay to repay the debt monthly. Since this amount remains unchanged and applies to the entire loan period, loan repayment is considered a fixed cost.
AUP salary. Employee wages can be classified as both fixed and variable costs - it all depends on the terms of payment. This is because wages vary depending on various factors. But, for example, the fixed salary of employees remains constant, then, obviously, this will relate to the fixed costs of the enterprise.
Rental payments. As mentioned above, the company leases the premises, therefore, pays monthly rent to its landlord. Rent payments will need to be made even when production is reduced or suspended, so rent can be classified as a fixed cost.
Depreciation. , machines and other fixed assets wear out over time, so to compensate for wear and tear, depreciation is classified as production costs. The amount of depreciation charges is calculated based on the depreciation rate for 1 year. Therefore, depreciation can be considered a fixed cost.
Payment of utility bills. In order to carry out its production activities uninterruptedly, the company uses resources such as electricity, water supply, sometimes gas, etc., that is, it is necessary to pay utility bills. Payment for utilities is made under an agreement that is concluded for at least 1 year, so utility payments also fall under the definition of “fixed costs.”

A talented leader knows how important financial reporting is for any enterprise. Understanding production costs allows you to choose a suitable production development strategy in both the short and long term.

Correct calculation of fixed and variable costs will allow you to accurately calculate the cost of production and, if necessary, reduce production costs. Ultimately, reducing the cost of production makes the product more attractive to the end consumer, which leads to an increase in the profit of the enterprise, that is, everything is interconnected in the production process.

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Let's talk about the enterprise's fixed costs: what economic meaning does this indicator have, how to use and analyze it.

Fixed costs. Definition

Fixed costs(EnglishFixedcostF.C.TFC ortotalfixedcost) is a class of enterprise costs that are not related (do not depend) on the volume of production and sales. At each moment of time they are constant, regardless of the nature of the activity. Fixed costs, together with variables, which are the opposite of constant, constitute the total costs of the enterprise.

Formula for calculating fixed costs/expenses

The table below shows possible fixed costs. In order to better understand fixed costs, let's compare them with each other.

Fixed costs= Salary costs + Premises rental + Depreciation + Property taxes + Advertising;

Variable costs = Costs of raw materials + Materials + Electricity + Fuel + Bonus part of salary;

Total costs= Fixed costs + Variable costs.

It should be noted that fixed costs are not always constant, because an enterprise, when developing its capacities, can increase production space, the number of personnel, etc. As a result, fixed costs will also change, which is why management accounting theorists call them ( conditionally fixed costs). Similarly for variable costs – conditionally variable costs.

An example of calculating fixed costs at an enterprise inExcel

Let us clearly show the differences between fixed and variable costs. To do this, in Excel, fill in the columns with “production volume”, “fixed costs”, “variable costs” and “total costs”.

Below is a graph comparing these costs with each other. As we see, with an increase in production volume, the constants do not change over time, but the variables grow.

Fixed costs do not change only in the short term. In the long term, any costs become variable, often due to the impact of external economic factors.

Two methods for calculating costs in an enterprise

When producing products, all costs can be divided into two groups using two methods:

fixed and variable costs;
indirect and direct costs.

It should be remembered that the costs of the enterprise are the same, only they can be analyzed using different methods. In practice, fixed costs strongly overlap with such concepts as indirect costs or overhead costs. As a rule, the first method of cost analysis is used in management accounting, and the second in accounting.

Fixed costs and the break-even point of the enterprise

Variable costs are part of the break-even point model. As we determined earlier, fixed costs do not depend on the volume of production/sales, and with an increase in output, the enterprise will reach a state where the profit from products sold will cover variable and fixed costs. This state is called the break-even point or the critical point when the enterprise reaches self-sufficiency. This point is calculated in order to predict and analyze the following indicators:

at what critical volume of production and sales will the enterprise be competitive and profitable;
what volume of sales must be made in order to create a zone of financial security for the enterprise;

Marginal profit (income) at the break-even point coincides with the enterprise's fixed costs. Domestic economists often use the term gross income instead of marginal profit. The more the marginal profit covers fixed costs, the higher the profitability of the enterprise. You can study the break-even point in more detail in the article ““.

Fixed costs in the balance sheet of the enterprise

Since the concepts of fixed and variable costs of an enterprise relate to management accounting, there are no lines in the balance sheet with such names. In accounting (and tax accounting) the concepts of indirect and direct costs are used.

In general, fixed costs include balance sheet lines:

Cost of goods sold – 2120;
Selling expenses – 2210;
Managerial (general business) – 2220.

The figure below shows the balance sheet of Surgutneftekhim OJSC; as we see, fixed costs change every year. The fixed cost model is a purely economic model and can be used in the short term when revenue and production volume change linearly and naturally.

Let's take another example - OJSC ALROSA and look at the dynamics of changes in semi-fixed costs. The figure below shows the pattern of cost changes from 2001 to 2010. You can see that costs have not been constant over 10 years. The most consistent cost throughout the period was selling expenses. Other expenses changed one way or another.

Resume

Fixed costs are costs that do not change depending on the volume of production of the enterprise. This type of costs is used in management accounting to calculate total costs and determine the break-even level of the enterprise. Since an enterprise operates in a constantly changing external environment, fixed costs also change in the long run and therefore in practice they are more often called semi-fixed costs.

Natalya Belorusova,
Leading Economist of LLC PVP "Contact"
Financial Director
No. 10 (98) October 2010

During the analysis of their financial statements, the financiers of PVP “Contact” found a way to more accurately calculate the variable expenses of a trading company. All that was needed was an official balance sheet and income statement.

The production and implementation enterprise “Contact” specializes in the supply of medical and dental equipment. Branches of the enterprise operate in four cities of the Siberian region.

Despite the fact that the Contact company was founded almost 20 years ago, in 1992, a full-fledged financial service was created only three years ago. Now this service includes not only the accounting department, but also the economic planning department. The main reason for creating such a financial unit was the increase in the scale of the business and, as a consequence, the need to monitor its financial condition.

One of the primary tasks of financiers was the calculation and analysis of indicators such as marginal income, break-even point, as well as determining achievable business growth rates*. Interestingly, the company did not maintain any management accounting. Therefore, we had to use only financial statements data. In particular, limit yourself to the balance sheet and profit and loss account. Due to a lack of information, the company encountered a number of problems related to the calculation of the previously mentioned indicators. As it turned out, due to the peculiarities of accounting, it is impossible to clearly distinguish between the company’s fixed and variable expenses. Now about everything in order and in detail - how the company solved the listed problems.

Specifics of accounting for costs of transporting goods

Since the main activity of PVP “Contact” is wholesale trade, variable costs include the cost of goods and transportation and procurement costs, the correct assessment of which has caused certain difficulties. The fact is that these expenses could either be attributed to the cost of goods or included in business expenses.

Table 1. Fragment of the profit and loss report for the month (accounting and management accounting), rub.

Table 2. Deviations of financial indicators when using accounting and management (adjusted) data

In the first case, the delivery of goods is highlighted as a separate line in the delivery note. In accordance with the company's accounting policy, transportation costs are immediately charged to the cost of goods (account 41 “Goods”) and automatically become part of the cost of goods (p.

021 “Including goods” in the income statement).

But transportation costs can also be presented in a separate act. For example, if delivery was provided not by the supplier of the goods itself, but by a third-party carrier. Such costs are accumulated in account 44 “Sales expenses” and then written off as expenses for the period in proportion to the volume of goods sold.

Consequently, the cost of goods reflected in Form No. 2 (profit and loss statement) takes into account only part of the transportation costs.

Technique for determining variable costs

To highlight the amount of variable transport costs, which, due to certain accounting nuances, fell into the composition of commercial expenses, the production and implementation enterprise "Contact" used the following formula:

Write-off of transport costs = Balance of transport costs at the end of the period: Balance of goods at the end of the period x Write-off of goods,

Where Balance of transportation costs at the end of the period- this is the debit balance on account 44 “Sales expenses”, which in the case of PVP “Contact” is reflected in the balance sheet (p. 213). In some organizations, the balance of account 44 may be reflected in the line “Other inventories and costs” (p. 217);

—Balance of goods at the end of the period- this is the line “Finished goods and goods for resale” of the balance sheet (p. 214). In the case of trading companies, it usually reflects only goods for resale;

—Write-off of goods for the period is reflected in the line “Cost of goods sold” (line 021) in the income statement.

Perhaps, it’s worth warning right away that it is not possible to accurately isolate the costs of transporting goods from business expenses, having only annual or quarterly financial statements on hand. And the Contact company had to verify this from its own experience. The fact is that the error in the calculations turns out to be too significant. This is especially evident in situations where the share of transport costs in the cost price fluctuates significantly throughout the year.

Therefore, in such cases it will be more correct to use data from monthly interim financial statements. This is exactly what they did in PVP “Contact”.

By the way, with this approach, determining the amount of adjustments for the entire year will not be particularly difficult. To do this, it is enough to sum up the previously calculated monthly write-offs of transportation costs.

Once write-offs (adjustments) to transportation expenses are determined to produce the correct figures on the income statement, the adjustments are included in cost of goods sold. And at the same time they should be excluded from business expenses. Example

Example

For a trading company, according to the balance sheet, the balance of transportation expenses at the end of the month was 1,342 rubles, the balance of goods at the end of the period was 106,965 rubles, and the cost of goods sold, appearing in the profit and loss statement, was 31,506 rubles.

Accordingly, the amount of adjustment for transportation costs will be 395 rubles. (1342: 106,965 x 31,506). The income statement before and after adjustment is presented in Table 1 on page 41. Significant changes are visible to the naked eye. The deviation in gross profit reaches almost 6 percent, in marginal profit - more than 9 percent and in the margin of financial strength - 8 percent.

Fixed costs. Formula. Definition. Example calculation in Excel

What did the fixes affect?

The discrepancies in financial indicators of accounting and management accounting (before and after adjustments) reached 9 percent. And this despite the fact that often less significant deviations can lead to more serious errors when calculating indicators that are significant for company management.

In conclusion, it is worth saying that the methodology for determining variable costs and calculating basic financial indicators used in the Contact PVP may well be adopted by other trading companies. Provided that their variable costs include mainly the cost of the product and the cost of its transportation. This will allow management to operate with more accurate data in their work.

Variable costs

T.A. Frolova
Microeconomics: lecture notes
Taganrog: TRTU, 2006

Topic 6. PRODUCTION COSTS AND PROFIT

2. Fixed, variable and total costs

Short term is a period of time during which some factors of production are constant and others are variable.

Fixed factors include fixed assets and the number of firms operating in the industry.

How to calculate variable costs (examples, formula)

During this period, the company has the opportunity to vary only the degree of utilization of production capacity.

Long term is a period of time during which all factors are variable. In the long term, a company has the opportunity to change the overall size of buildings, structures, the amount of equipment, and the industry - the number of firms operating in it.

Fixed costs ( F.C. ) - these are costs, the value of which in the short term does not change with an increase or decrease in production volume.

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

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

Variable costs ( V.C. ) - these are costs, the value of which changes depending on the increase or decrease in production volume.

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

Average variable costs (AVC) are:

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

Total costs are a function of output produced:

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

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

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 ( M.C. ) is the increase in total costs caused by an infinitesimal increase in production. Marginal cost usually refers to the cost associated with producing an additional unit of output.

Calculation of fixed costs - section Economics, Organization of an enterprise in the field of landscape design services Calculation of Fixed Costs. Fixed Costs Are Composed of Soda Expenses...

Calculation of fixed costs. Fixed costs consist of the cost of maintaining administrative, technical and support staff, rental of premises, advertising, office and other expenses.

To calculate the amount of fixed costs, it is necessary to determine the amount of salaries according to the staffing table for engineering and technical workers in Table 2.3 and auxiliary workers in Table 2.4, as well as the amount of expenses for each of the items listed above. We summarize the calculation of fixed costs in Table 2.5. Table 2.3. Staffing table of administrative and technical personnel POST NAME Number of Months. salary, rub. Salary amount rub. Director 1 24000 24000 Team leader 6 15000 90000 Work producer 1 12000 12000 Architect 2 13500 27000 Designer 2 13500 27000 Economist 2 9000 18000 Estimator 2 9000 18000 Marketing engineer 3 9000 27000 Agronomist 1 12000 12000 Design engineer 2 7500 15000 Manager supply 3 7500 22500 TOTAL 25 283500 Table 2.4 Staffing schedule of auxiliary workers NAME Qty. Monthly. salary Amount of Salaries Repairman 1 6000 6000 Electrician 1 6000 6000 Cleaner 1 3000 3000 Equipment adjuster 1 6000 6000 TOTAL 4 21000 Table 2.5. Administrative and general expenses per year p p Item of expenses Amount thousand rubles 1. Salaries of administrative and maintenance personnel 3654 2. Payroll tax 1278.9 3. Transportation costs 450 4. Office expenses 168 5.

Examples of production costs: accessible accounting

Payment for telephone, telefax, Internet 126 6. Rent including utilities 180 7. Advertising and marketing expenses 900 8. Business trips 360 9. Entertainment expenses 210 10. Unforeseen expenses 540 11. Repair and maintenance of equipment 360 12. Costs for labor protection and environmental protection 90 13. Household expenses 540 TOTAL 8856.9 Thus, the total amount of fixed expenses is 8856.9 rubles. per year. 2.3.3. Calculation of investment efficiency indicators To organize a company providing landscape services, it is necessary to invest 1,764 thousand rubles. Investments are intended for the purchase of equipment, inventory and other expenses associated with the organization.

The estimated volume of landscape services is six objects per month.

Considering that work can only be carried out seven months a year, this is forty-two objects per year. When calculating the economic efficiency of organizing a landscape company, we take the average cost of one object with an area of 12 acres in the amount of 720 thousand rubles. Variable costs include the price of materials, wages, etc. are 60 or 432 thousand. rub. The constant component in the price is 123,870 rubles. 5202900 42 Planned savings are included in the price in the amount of 30 of the total cost.

Indicators characterizing the effectiveness of the project. Labor productivity P Or H, where Or is the volume of sales H is the number of personnel.

P 30240 45 672 thousand rubles. Return on assets F Or Sof, where Sof is the cost of fixed assets.

F 30240 840 36 rub. The payback period of the project T is defined as the ratio of net profit to the amount of initial investments T 1764 6894.72 0.26 years or 3.12 months. The expected results of the project implementation per year are presented in the following table. 2.6. Table 2.6 Expected results of the project Name Unit of measurement quantity Production volume object 42 Sales volume thousand rubles. 30240 Cost of fixed assets thousand rubles 915 Number of working people. 45 Cost of production thousand rubles. 21168 Labor productivity thousand rubles. 672 Capital productivity rub. rub. 36 Balance sheet profit thousand rubles. 9072 Income tax thousand rubles. 2177.28 Net profit thousand rubles. 6894.72 Profitability 30 Payback period years 0.26 2.4.

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Net sales in the balance sheet: line. Sales volume on the balance sheet: how to calculate?

Every year, companies prepare financial statements. Using data from the balance sheet and profit and loss report, you can determine the efficiency of the organization, as well as calculate the main planned indicators. Provided that management and the finance department understand the meaning of terms such as profit, revenue and sales on the balance sheet.

Terminology

The volume of product sales on the balance sheet is the amount of revenue received for the sale of goods in the reporting period. In this case, the form of calculations does not matter. Products can be sold on credit, for cash, with deferred payment or at a discount. Therefore, for a more accurate calculation, the formula for calculating net sales in the balance sheet is used, when the revenue received is adjusted by the amount of goods shipped on credit.

Sales volume reflects the amount of funds received by the company. Therefore, it should be calculated by all organizations. The indicator can be expressed in the quantity of goods sold, the amount of funds received, the monetary value of goods sold, etc.

Revenue

First of all, you need to determine revenue:

Revenue = Production volume: output x Price.

For an enterprise that has a monopolist on the market, the price of the product does not change. That is, sales volume depends only on the number of products manufactured. To determine how efficiently an enterprise operates, it is necessary to subtract total expenses from the amount of revenue received. Costs increase as output increases. This nuance should be taken into account when planning production.

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Scope of work

Work is an action aimed at development. Production volume is measured in the number of manufactured products of each type. How to calculate this indicator, for example, in construction? It is necessary to first familiarize yourself with the design materials and divide them into underground and above-ground work. Then the volume of work required to complete each task is calculated: laying the foundation, heating system, water supply system, all floors and building elements. The rate of material consumption is indicated in the design documentation. The calculated amount of work is multiplied by its cost.

Costs

The amount of expenses for production of products in accounting is called cost. It includes labor costs, material and logistics costs, and interest on loans. All expenses are divided into fixed and variable. The former do not depend on production efficiency. It is the sum of fixed costs such as rent, taxes, depreciation, etc. Variable costs change in proportion to the change in the quantity of products produced. Most of the funds are spent on purchasing materials and paying salaries.

Profit calculation

Profit is one of the performance indicators. Therefore, when analyzing the work of an organization, one should correlate the level of profit received with the costs incurred. There are several types of profits.

1. Income received from sales is called revenue or sales volume.

2. Gross profit is sales volume adjusted by the amount of production costs incurred:

VP = Sales volume - Cost.

3. Net profit is gross profit cleared of all other expenses:

Example No. 1

In April, the company sold goods worth 200 thousand rubles. The cost of production amounted to 90 thousand rubles. Overhead expenses in the form of salaries, rent, taxes amounted to another 30 thousand rubles. We count:

VP = OP - S/S = 200 - 90 = 110 thousand rubles.
PE = VP - Expenses = 110 - 30 = 90 thousand rubles.

Formula

OP = (Fixed costs + Profit): (Price per unit - Variable costs per unit).

To determine your target sales volume, use the following formula:

OP = (Fixed costs + Profit before interest) : Marginal profit.
MP = Price - Variable costs per unit.

As mentioned earlier, in order to determine the efficiency of the enterprise, it is more appropriate to calculate the net sales volume in the balance sheet. How to calculate? It is necessary to adjust the OP for the amount of returned goods, as well as those that were sold at a discount and provided by the consumer. The formula looks like this:

OPC = (Net profit x 100%) : (OP - Returnable products).

Example No. 2

Based on the results of a month of work, the company received 1.32 million rubles. profit. The product is sold at a price of 250 rubles. per piece. Variable costs per unit are 98 rubles, and constant costs for the entire production volume are 0.38 million rubles. Let's determine the sales volume in the balance sheet.

1. First you need to find the marginal profit:

MP = Price - Variable costs = 250 - 98 = 152 rubles.

2. Calculate sales volume:

OP = (Fixed costs + Profit before interest): Marginal profit = (380,000 + 1,320,000) : 152 = 11,250 pcs.

How to determine sales volume in the balance sheet

Having the financial statements data, you can calculate all the main financial indicators. You can, for example, determine sales volume. There is no balance formula as such. Since this data is reflected in the “Profit and Loss Statement”. Line 2110 indicates the amount of products sold in monetary terms after deducting VAT. All costs for the production and delivery of products are also reflected here: line 2120 + line 2210 + line 2220. The organization may have other unforeseen expenses (line 2350) and income (line 2340).

Line 2400 = 2110 - (2120 + 2210 + 2220) + 2340 - 2350 - 2410, where 2410 is the amount of income tax.

Net sales on the balance sheet can be calculated by subtracting retained earnings (uncovered loss) at the end of the period from the value at the beginning of the period. A positive difference indicates a net profit, and a negative difference indicates losses.

Profitability

The efficiency of the enterprise in the reporting period is calculated by correlating various indicators of profitability and costs. There are several profitability indicators. Let's look at the main ones.

Sales efficiency is determined by the ratio of profit to revenue. If gross profit is used in the numerator of the fraction, then this indicator is called gross return on sales. =:

GPM = Gross Profit: Revenue = (Sales Volume - Full Sales) : (Price x Number of Products).

Operating return on sales is calculated as follows:

ROS = EBIT: Revenue = line 2300 + 2330: (2110 - (2120 + 2210 + 2220)).

Balance sheet return on sales:

RP = Profit: Revenue = line 050: line 010 (form No. 2).
RP (from form No. 2) = 2200: 2110.

Most often, to determine sales efficiency, the net profitability indicator is calculated:

NPM = Net Profit: Revenue.

These formulas are used to determine the share of different types of profit in revenue. By analyzing the value of the coefficient over time, you can determine what changes have occurred in the organization’s activities.

Explanations for reporting

Each type of accounting report is accompanied by an explanatory note. It contains information:

about the chosen method of accounting for fixed assets, inventory items;
description of some balance sheet items (terms of debt repayment, rent payments, etc.);
information about shareholders, capital structure;
data on mergers, acquisitions, liquidations;
off-balance sheet items.

Often an explanatory note provides more information about the financial position than statements. According to data from the balance sheet and f. No. 2 you can obtain information about the current state of affairs and performance efficiency. Having false information is worse than not having it. Therefore, it is important that financial statements are prepared correctly.

Unfortunately, even accountants make mistakes. The use of technical means allows you to avoid arithmetic errors, but not methodological ones. Also, reporting may be distorted due to the low skills of a specialist.

It is important to understand that the data in the balance sheet reflects the state of affairs at the reporting date. The very next day these indicators change. In the last weeks of the reporting period, the organization tries to defer payments, but in the first days of the new year, funds will be used to pay off the debt. Therefore, reporting is always done “with a reserve”. In the registers you can always find costs that will reduce the profitability indicator. For example, write off more inventory, non-current assets or bad debts. After all, it is always easier to lose profit than to increase it.

According to accounting rules, all transactions must be reflected at historical cost. But assets and liabilities enter the balance sheet at different periods of time. Therefore, on-balance sheet acquisition costs do not reflect the true value of the assets. You should also consider currency fluctuations if you have assets or liabilities denominated in foreign currencies.

Conclusion

Financial statement data is used to calculate sales volume. However, you should not rely entirely on balance and form #2. They contain only part of the important information. Typically, profitability and real value of assets in financial statements are understated.

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Probably every person who has worked for the “owner” for at least one day wants to start their own business and be their own boss. But in order to open your own business, which will bring good income, you need to correctly set up a financial model of economic activity.

Financial model of the enterprise

Why is this necessary? In order to have a correct idea of future income, what level the enterprise’s fixed and variable expenses will have, to understand where it will need to go and what financial policy to use when making decisions.

The basis for building a successful business is its commercial component. According to economic theory, money is goods that can and should generate new goods. If you start your own business, you need to understand that its profitability must come first, otherwise the person will engage in philanthropy.

You can't work at a loss

Profit is equal to the difference between income and costs, which are divided into fixed and variable expenses of the enterprise. When expenses are greater than income, profit turns into loss. The main task of an entrepreneur is to ensure that the business generates maximum income with minimal use of available resources.

This means that you should always strive to sell as many goods or services as possible, while reducing the level of costs of the enterprise.

If everything is more or less clear with income (how much you produced, how much you sold), then with expenses it’s much more complicated. In this article we will look at fixed and variable costs, as well as how to optimize costs and find a middle ground.

In this article, expenses, costs and expenses, as well as in economic literature, will be used as synonymous words. So what types of costs are there?

Types of expenses

All enterprise costs can be divided into fixed and variable costs. This division allows for prompt budgeting and planning of the necessary resources for conducting the business activities of the enterprise.

Fixed costs are those costs whose level does not depend on the volume of products produced. That is, no matter how many units you produce, your fixed costs will not change.

Variable and semi-fixed costs have different effects on production activities. Why conditionally constant? Because not all types of expenses can be classified as constant, since they can change their properties and accounting procedures from time to time.

What do variable and fixed costs include?

For example, such expenses may include salaries of administrative and management personnel, but only if they receive money regardless of the financial results of the enterprise. Despite the fact that in the West, managers have long been making money on their managerial and organizational skills, increasing their client base and expanding markets, in most enterprises in the Russian Federation, heads of various structures receive a stable monthly salary without reference to work results.

This leads to the fact that a person simply has no incentive to improve anything in his work. Because of this, labor productivity is at a low level, and the desire to move forward to new technological processes is generally at zero.

Fixed expenses

In addition to management salaries, rental payments can be considered fixed expenses. Imagine that you are in the tourism business and you do not have your own premises.

In this case, you will be forced to pay someone to rent the commercial property. And no one is saying that this is the worst option. The cost of building your own office from scratch is very high and in many cases will not pay off even in 5-10 years if the business is small or middle class.

Therefore, many people prefer to take the necessary square meters as rent. And you can immediately guess that regardless of whether your business has gone well or you are in deep loss, the landlord will demand the monthly payment specified in the contract.

What could be more stable in accounting than paying wages? This is depreciation. Any fixed asset must be depreciated month after month until its initial cost is zero.

Methods for calculating depreciation may be different, but, of course, within the framework of the law. These monthly expenses are also considered the company's fixed costs.

There are many more such examples: communication services, communications, waste removal or recycling, provision of necessary working conditions, etc. Their main feature is that they are easy to calculate both in the current period and in future ones.

Variable expenses

Such costs are those that vary in direct proportion to the volume of products produced or services provided.

For example, in the balance sheet there is such a line as raw materials and supplies. They indicate the total cost of those funds that the enterprise needs for production activities.

Let's assume that you need 2 square meters of wood to produce one wooden box. Accordingly, to create a batch of 100 such units of product you will need 200 sq.m of material. Therefore, such costs can be safely classified as variable.

Wages can relate not only to fixed, but also to variable expenses. This will happen in cases where:

a changed volume of production requires a change in the number of employees employed in the manufacturing process;
workers receive percentages that correspond to deviations in the working standard of production.

Under such circumstances, it is quite difficult to plan the amount of labor costs in the long term, since it will depend on at least two factors.

Also, in the process of production activities, fuel and various types of energy resources are consumed: light, gas, water. If all these resources are used directly in the manufacturing process (for example, the production of a car), then it would be logical that a large batch of products would require an increased amount of energy consumption.

Why do you need to know what fixed and variable costs exist?

Of course, such a classification of costs is needed to optimize the cost structure in order to increase profits. That is, you can immediately understand which costs you can save on, and which ones will exist in any case, and they can be reduced only by reducing the level of production. What does an analysis of variable and fixed costs look like?

Let's say you produce furniture at an industrial level. Your cost items are as follows:

raw materials and materials;
wages;
depreciation;
electricity, gas, water;
other.

So far everything is easy and clear.

The first step is to divide all this into fixed and variable expenses.

Permanent:

Salaries of directors, accountants, economists, lawyers.
Depreciation charges.
Used electrical energy for lighting.

The variables include the following.

Wages of workers, the standardized number of which depends on the volume of furniture produced (one or two shifts, the number of people in one assembly box, etc.).
Raw materials and supplies necessary to produce one unit of product (wood, metal, fabric, bolts, nuts, screws, etc.).
Gas or electricity, if these resources are consumed directly for the manufacture of furniture. For example, this is the electricity consumption of various furniture assembly machines.

Impact of expenses on production costs

So, you have listed all the expenses of your business. Now let's look at the role that fixed and variable costs play in production costs. It is necessary to go through all the fixed costs and see how the structure of the enterprise can be optimized so that less management personnel are involved in production during the production process.

The breakdown of fixed and variable expenses above shows where to start. You can save on energy resources either by switching to alternative sources, or by modernizing in order to increase the level of equipment efficiency.

After this, it’s worth going through all the variable costs, tracking which of them are more or less dependent on external factors, and which can be calculated with confidence.

Once you understand the cost structure, you can easily transform any business to suit the needs and requirements of any owner and his strategic plans.

If your goal is to reduce product costs in order to win several positions in the sales market, then you should pay more attention to variable costs.

Of course, as soon as you understand what constitutes fixed and variable expenses, you will be able to easily navigate and quickly understand where you need to “tuck your tails between your legs” and where you can “loose your belts.”

The production costs of a business can be divided into two categories: variable and fixed costs. Variable costs depend on changes in production volume, while constant costs remain fixed. Understanding the principle of classifying costs into fixed and variable is the first step to managing costs and improving production efficiency. Knowing how to calculate variable costs will help you reduce your unit costs, making your business more profitable.

Steps

Calculation of variable costs

Classify costs into fixed and variable. Fixed costs are those costs that remain unchanged when production volume changes. For example, this may include rent and salaries of management personnel. Whether you produce 1 unit or 10,000 units in a month, these costs will remain approximately the same. Variable costs change with changes in production volume. For example, these include the costs of raw materials, packaging materials, product delivery costs and wages of production workers. The more products you produce, the higher your variable costs will be.

Add together all the variable costs for the time period under consideration. Having identified all variable costs, calculate their total value for the analyzed period of time. For example, your manufacturing operations are fairly simple and involve only three types of variable costs: raw materials, packaging and shipping costs, and workers' wages. The sum of all these costs will be the total variable costs.

Let’s assume that all your variable costs for the year in monetary terms will be as follows: 350,000 rubles for raw materials and materials, 200,000 rubles for packaging and delivery costs, 1,000,000 rubles for workers’ wages.
Total variable costs for the year in rubles will be: 350000 + 200000 + 1000000 (\displaystyle 350000+200000+1000000), or 1550000 (\displaystyle 1550000) rubles These costs directly depend on the volume of production for the year.

Divide total variable costs by production volume. If you divide the total amount of variable costs by the volume of production over the analyzed period of time, you will find out the amount of variable costs per unit of production. The calculation can be represented as follows: v = V Q (\displaystyle v=(\frac (V)(Q))), where v is the variable cost per unit of output, V is the total variable cost, and Q is the volume of production. For example, if in the above example the annual production volume is 500,000 units, then the variable cost per unit would be: 1550000 500000 (\displaystyle (\frac (1550000)(500000))), or 3, 10 (\displaystyle 3,10) ruble

Using variable cost information in practice

Assess trends in variable costs. In most cases, increasing production volume will make each additional unit produced more profitable. This is because fixed costs are spread over more units of production. For example, if a business that produced 500,000 units of product spent 50,000 rubles on rent, these costs in the cost of each unit of production amounted to 0.10 rubles. If the production volume doubles, then rental costs per unit of production will already be 0.05 rubles, which will allow you to get more profit from the sale of each unit of goods. That is, as sales revenue increases, the cost of production also increases, but at a slower pace (ideally, in the unit cost of production, the variable costs per unit should remain unchanged, and the component of the fixed costs per unit should fall).

Use the percentage of variable costs in the cost price to assess risk. If you calculate the percentage of variable costs in the unit cost of production, you can determine the proportional ratio of variable and fixed costs. The calculation is made by dividing the variable costs per unit of production by the cost per unit of production using the formula: v v + f (\displaystyle (\frac (v)(v+f))), where v and f are respectively variable and fixed costs per unit of production. For example, if fixed costs per unit of production are 0.10 rubles, and variable costs are 0.40 rubles (with a total cost of 0.50 rubles), then 80% of the cost is variable costs ( 0.40 / 0.50 = 0.8 (\displaystyle 0.40/0.50=0.8)). As an outside investor in a company, you can use this information to assess the potential risk to the company's profitability.

Conduct a comparative analysis with companies in the same industry. First, calculate your company's variable costs per unit. Then collect data on the value of this indicator from companies in the same industry. This will give you a starting point for assessing your company's performance. Higher variable costs per unit may indicate that a company is less efficient than others; whereas a lower value of this indicator can be considered a competitive advantage.

The value of variable costs per unit of output above the industry average indicates that the company spends more money and resources (labor, materials, utilities) on production than its competitors. This may indicate its low efficiency or the use of too expensive resources in production. In any case, it will not be as profitable as its competitors unless it cuts its costs or increases its prices.
On the other hand, a company that is able to produce the same goods at a lower cost realizes a competitive advantage in earning a greater profit from the set market price.
This competitive advantage may be based on the use of cheaper materials, cheaper labor or more efficient production facilities.
For example, a company that purchases cotton at a lower price than other competitors can produce shirts with lower variable costs and charge lower prices for the products.
Public companies publish their reports on their websites, as well as on the websites of the exchanges on which their securities are traded. Information about their variable costs can be obtained by analyzing the "Income Statements" of these companies.

Conduct a break-even analysis. Variable costs (if known) combined with fixed costs can be used to calculate the break-even point for a new manufacturing project. The analyst is able to draw a graph of the dependence of fixed and variable costs on production volumes. With its help, he will be able to determine the most profitable level of production.