Let's talk about the enterprise's fixed costs: what economic sense carries this indicator 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 combined with variables, which are the opposite of constant, are total costs enterprises.

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 are 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 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, then 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 case 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 pure economic model, and it 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 costs is used in management accounting to calculate total costs and determine the break-even level of an enterprise. Since the company operates in a constantly changing external environment, then fixed costs also change in the long run and therefore in practice they are more often called conditionally fixed costs.

Certain costs, which do not depend at all on changes in production volume. They can only depend on time. At the same time, variables and permanent costs in sum determine the size of the total costs.

You can also have fixed costs if you derive this indicator from the formula that determines: Revenue = Fixed costs - Variable (total) costs. That is, based on this formula, we get: Fixed costs = Revenue + Variable (total) costs.

Sources:

• Average variable costs

Costs play a big role in business development, because they directly affect profits. In modern economic science There are two types: fixed and variable costs. Their optimization allows you to increase the efficiency of the enterprise.

To begin with, it is necessary to define short-term and long term. This will allow you to better understand the essence of the issue. In the short run, factors of production can be constant or variable. In the long run, they will only be variables. Let's say the building is . In the short term, it will not change in any way: the company will use it to, for example, place machines. However, in the long term, the company can buy a more suitable building.

Fixed costs

Fixed costs are those that do not change in the short run even if production increases or decreases. Let's say the same building. No matter how many goods are produced, the rent will always be the same. You can work even the whole day, the monthly payment will still remain unchanged.

To optimize fixed costs, a comprehensive analysis is required. Depending on the specific unit, solutions may vary significantly. If we're talking about about the rent for the building, then you can try to reduce the price for accommodation, occupy only part of the building so as not to pay for everything, etc.

Variable costs

It is not difficult to guess that variables are costs that can change depending on the decrease or increase in production volumes in any period. For example, to make one chair you need to spend half a tree. Accordingly, to make 100 chairs, you need to spend 50 trees.

It is much easier to optimize variable costs than fixed ones. Most often, it is simply necessary to reduce the cost of production. This can be achieved, for example, by using cheaper materials, upgrading technology or optimizing the location of workplaces. Let’s say that instead of oak, which costs 10 rubles, we use poplar, which costs 5 rubles. Now, to produce 100 chairs you need to spend not 50 rubles, but 25.

Other indicators

There are also a number of secondary indicators. Total costs are a combination of variable and fixed costs. Let’s say that for one day of renting a building, an entrepreneur pays 100 rubles and produces 200 chairs, the cost of which is 5 rubles. Total costs will be equal to 100+(200*5)=1100 rubles per day.

Beyond that, there are plenty of averages. For example, average fixed costs (how much you need to pay for one unit of production).

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Classification of a company's costs in the short term.

When analyzing costs, it is necessary to distinguish costs for the entire output, i.e. general (full, total) production costs, and production costs per unit of production, i.e. average (unit) costs.

Considering the costs of the entire output, one can find that when the volume of production changes, the value of some types of costs does not change, while the value of other types of costs is variable.

Fixed costs(F.C. – fixed costs) are costs that do not depend on the volume of production. These include the costs of maintaining buildings, major renovation, administrative and management expenses, rent, property insurance payments, some types of taxes.

The concept of fixed costs can be illustrated in Fig. 5.1. Let us plot the quantity of products produced on the x-axis (Q), and on the ordinate - costs (WITH). Then the fixed cost schedule (FC) will be a straight line parallel to the x-axis. Even when the enterprise does not produce anything, the value of these costs is not zero.

Rice. 5.1. Fixed costs

Variable costs (V.C. – variable costs) are costs, the value of which varies depending on changes in production volumes. Variable costs include costs of raw materials, supplies, electricity, workers' compensation, and costs of auxiliary materials.

Variable costs increase or decrease in proportion to output (Fig. 5.2). On initial stages produced

Rice. 5.2. Variable costs

production, they grow at a faster rate than manufactured products, but as optimal output is reached (at the point Q 1) the growth rate of variable costs is decreasing. In larger firms, unit costs per unit of output are lower due to increased production efficiency, which is ensured by more high level specialization of workers and more full use capital equipment, so the growth of variable costs is already slower than the increase in production. In the future, when the enterprise exceeds its optimal size, the law of diminishing returns (returns) comes into play and variable costs again begin to outpace production growth.

Law of Diminishing Marginal Productivity (Profitability) states that, starting from a certain point in time, each additional unit of a variable factor of production brings a smaller increase in total output than the previous one. This law takes place when any factor of production remains unchanged, for example, production technology or size production area, and is effective only for a short period of time, and not throughout long period existence of humanity.

Let us explain the operation of the law using an example. Let's assume that the enterprise has a fixed amount of equipment and workers work in one shift. If an entrepreneur hires an additional number of workers, work can be carried out in two shifts, which will lead to an increase in productivity and profitability. If the number of workers increases further, and workers begin to work in three shifts, then productivity and profitability will increase again. But if you continue to hire workers, there will be no increase in productivity. Such a constant factor as equipment has already exhausted its capabilities. The addition of additional variable resources (labor) to it will no longer give the same effect; on the contrary, starting from this moment, the costs per unit of output will increase.

The law of diminishing marginal productivity underlies the behavior of the profit-maximizing producer and determines the nature of the supply function on price (the supply curve).

It is important for an entrepreneur to know to what extent he can increase production volume so that variable costs do not become very large and do not exceed the profit margin. The differences between fixed and variable costs are significant. A manufacturer can control variable costs by changing the volume of output. Fixed costs must be paid regardless of production volume and are therefore beyond the control of management.

General costs(TS– total costs) is a set of fixed and variable costs of the company:

TC= F.C. + V.C..

Total costs are obtained by summing the fixed and variable cost curves. They repeat the configuration of the curve V.C., but are spaced from the origin by the amount F.C.(Fig. 5.3).

Rice. 5.3. General costs

For economic analysis, average costs are of particular interest.

Average costs is the cost per unit of production. The role of average costs in economic analysis determined by the fact that, as a rule, the price of a product (service) is set per unit of production (per piece, kilogram, meter, etc.). Comparing average costs with price allows you to determine the amount of profit (or loss) per unit of product and decide on the feasibility of further production. Profit serves as a selection criterion the right strategy and company tactics.

Distinguish the following types average costs:

Average fixed costs ( AFC – average fixed costs) – fixed costs per unit of production:

АFC= F.C. / Q.

As production volume increases, fixed costs are distributed across all more products, so that average fixed costs decrease (Fig. 5.4);

Average variable costs ( AVC – average variable costs) – variable costs per unit of production:

AVC= V.C./ Q.

As production volume increases AVC first they fall, due to increasing marginal productivity (profitability) they reach their minimum, and then, under the influence of the law of diminishing returns, they begin to increase. So the curve AVC has an arched shape (see Fig. 5.4);

average total costs ( ATS – average total costs) – total costs per unit of production:

ATS= TS/ Q.

Average costs can also be obtained by adding average fixed and average variable costs:

ATC= A.F.C.+ AVC.

The dynamics of average total costs reflects the dynamics of average fixed and average variable costs. While both are decreasing, average total costs are falling, but when, as production volume increases, the growth of variable costs begins to outpace the decrease in fixed costs, average total costs begin to rise. Graphically, average costs are depicted by summing the curves of average fixed and average variable costs and have a U-shape (see Fig. 5.4).

Rice. 5.4. Production costs per unit of production:

MS – limit, AFC – average constants, АВС – average variables,

ATS – average total production costs

The concepts of total and average costs are not enough to analyze the behavior of a company. Therefore, economists use another type of cost - marginal.

Marginal cost(MS – marginal costs) are the costs associated with producing an additional unit of output.

The marginal cost category is of strategic importance because it allows you to show the costs that the company will have to incur if it produces one more unit of output or
save if production is reduced by that unit. In other words, marginal cost is a value that a firm can directly control.

Marginal costs are obtained as the difference between total production costs ( n+ 1) units and production costs n product units:

MS= TSn+1 – TSn or MS=D TS/D Q,

where D is a small change in something,

TS– total costs;

Q– production volume.

Marginal costs are presented graphically in Figure 5.4.

Let us comment on the basic relationships between average and marginal costs.

1. Marginal costs ( MS) do not depend on fixed costs ( FC), since the latter do not depend on the volume of production, but MS- These are incremental costs.

2. While marginal costs are less than average ( MS< AC), the average cost curve has a negative slope. This means that producing an additional unit of output reduces average cost.

3. When marginal costs are equal to average ( MS = AC), this means that average costs have stopped decreasing, but have not yet begun to increase. This is the point of minimum average cost ( AC= min).

4. When marginal costs become greater than average costs ( MS> AC), the average cost curve slopes upward, indicating an increase in average costs as a result of producing an additional unit of output.

5. Curve MS intersects the average variable cost curve ( ABC) and average costs ( AC) at the points of their minimum values.

To calculate costs and estimate production activities enterprises in the West and Russia use various methods. Our economy has widely used methods based on the category production costs, including total costs for the production and sale of products. To calculate the cost, costs are classified into direct, directly going towards the creation of a unit of goods, and indirect, necessary for the functioning of the company as a whole.

Based on the previously introduced concepts of costs, or costs, we can introduce the concept added value, which is obtained by subtracting from total income or enterprise revenue variable costs. In other words, it consists of fixed costs and net profit. This indicator is important for assessing production efficiency.

Allows you to calculate the minimum price of goods/services, determine the optimal volume of sales and calculate the value of the company's expenses. There are various methods of calculating by type of costs, the main ones are given below.

Production costs - calculation formulas

Calculation of production costs is easily carried out on the basis of estimate documentation. If such forms are not compiled in the organization, data from the reporting period will be required. accounting. It should be taken into account that all expenses are divided into fixed (the value remains unchanged over the period) and variable (the value changes depending on production volumes).

Total production costs - formula:

Total costs = Fixed costs + Variable costs.

This calculation method allows you to find out general expenses throughout the entire production. Detailing is carried out by departments of the enterprise, workshops, product groups, types of products, etc. Analysis of indicators over time will help predict the volume of production or sales, expected profit/loss, the need to increase capacity, and the inevitability of reducing expenditures.

Average production costs - formula:

Average costs = Total costs / Volume of manufactured products/performed services.

This indicator is also called the total cost of the product/service. Allows you to determine the level minimum price, calculate the efficiency of investing resources for each unit of production, compare mandatory costs with prices.

Marginal cost of production - formula:

Marginal costs = Change in total costs / Change in production volume.

The indicator of so-called additional costs makes it possible to determine the increase in costs for the production of additional volume of GP in the most profitable way. At the same time, the amount of fixed costs remains unchanged, while variable costs increase.

Pay attention! In accounting, the company's expenses are reflected in cost accounts - 20, 23, 26, 25, 29, 21, 28. To determine costs for the required period, you should sum up the debit turnover on the accounts involved. Internal turnover and balances at refineries are subject to exclusion.

How to calculate production costs - example

From the above example it is clear that the organization incurs fixed costs in the amount of 1200 rubles. in any case - in the presence or absence of production of goods. Variable expenses for 1 piece initially amount to 150 rubles, but costs are reduced as production increases. This can be seen from the analysis of the second indicator - Average costs, which decreased from 1350 rubles. up to 117 rub. per 1 unit of finished product. Calculation of marginal costs can be determined by dividing the increase in variable costs by 1 unit of product or by 5, 50, 100, etc.

To determine the total costs of producing different volumes of output and the costs per unit of output, it is necessary to combine production data included in the law of diminishing returns with information on input prices. As noted, over a short period of time, some resources associated with technical equipment enterprises remain unchanged. The number of other resources may vary. It follows that in the short term various types costs can be classified as either fixed or variable.

Fixed costs. Fixed costs are those costs whose value does not change depending on changes in production volume. Fixed costs are associated with the very existence of a company's production equipment and must be paid even if the company does not produce anything. Fixed costs usually include payment of obligations on bond loans, bank loans, rent payments, enterprise security, payment utilities(telephone, lighting, sewerage), as well as time-based salaries for employees of the enterprise.

Variable costs. Variables are those costs whose value changes depending on changes in production volume. These include costs of raw materials, fuel, energy, transport services, for the majority of labor resources, etc. The amount of variable costs varies depending on production volumes.

General costs is the sum of fixed and variable costs for each given volume of production.

We show total, fixed and variable costs on the graph (see Fig. 1).

At zero production volume total amount costs is equal to the sum of the firm's fixed costs. Then, with the production of each additional unit of output (from 1 to 10), the total cost changes by the same amount as the sum of the variable costs.

The sum of variable costs changes from the origin, and the sum of fixed costs is added each time to the vertical dimension of the sum of variable costs to obtain the total cost curve.

The distinction between fixed and variable costs is significant. Variable costs are costs that can be quickly controlled; their value can be changed over a short period of time by changing production volume. On the other hand, fixed costs are obviously beyond the control of the firm's management. Such costs are mandatory and must be paid regardless of production volumes.