The cost of production is equal. What is not included in the cost? Features of the full cost method

The basis of any business is the process of control; you can talk a lot about desire, the ability to organize and the availability of start-up capital, but all of them become secondary without the ability to control. Why is this happening?

In fact, any models (mechanisms) built by humans require systematic “adjustment” because nothing is eternal on this planet, and when it comes to models built using people themselves, the problem is aggravated many times over. Alas, no one has canceled the “human factor”; any business is, first of all, a model of interaction between different people to achieve certain goals, most often making a profit. But the question arises of how you can monitor the functioning process itself and, of course, check how effective the work of the constructed model is. In fact, it was precisely for monitoring business processes, which is impossible without analysis, that such indicators as cost, . Moreover, with the development of economic relations, more “advanced” ones appeared in the form of capital productivity, capital intensity, and so on.

Today we will talk about cost as one of the most important (if not the most important) indicators economic analysis business work. What is cost?

Types and types of cost

In fact, the cost price is the totality of all (I emphasize all) expenses in in monetary terms from the beginning of the business process to its final completion.

Important - very often the cost price means exclusively the costs of producing one unit of product; at most, total costs are added to the total amount. Which is fundamentally wrong; in fact, this is only one part of the total cost and, ultimately, the total amount must also include costs associated with organizing the business process. That is why there are two main types of cost:

Total cost (average)- this is a complete list of expenses, including expenses associated with organizing the business itself and purchasing equipment. For convenience and to obtain a readable analysis, the total costs associated with creating the business itself, including the contribution of working capital, start-up capital, etc., are divided into an estimated payback period and added in equal parts to general production expenses, as well as depreciation of fixed assets. Thus, the average cost per unit of production is formed;

An example of calculating the total cost.

Start-up costs for starting a business are 1,000,000 rubles, including fixed assets and working capital(conditionally, the full payback period in the business plan is 60 months). Total 16,667 rubles per month.

General expenses (salaries of the director, cleaners, taxes, building rent, lawyer’s services, etc.) amount to 150,000 rubles per month.

1000 units of leather belts were produced in a month (). The total costs for production amounted to 500,000 rubles (cost of leather, electricity, wages for workers, paint, threads).

Total total cost will be - 16667+150000+500000 / 1000 (product units) = 667 rubles for one leather belt (calculations are conditional)

Marginal cost- such calculations are used to determine the break-even threshold for production, plus, of course, profit maximization. What does this mean? There are actually two main elements: total production costs, plus depreciation and start-up capital and the second element is the cost of production itself (how much money we will spend if we produce one unit). So the first category is not directly related to production volumes (or rather, it is extremely elastic). By and large, a salesperson in a store can sell both (or) and 100.

Example of marginal cost calculation.

We take the numbers from the example above, but the calculation method changes:

1 month 1000 belts produced – 16667+150000+500000 / 1000 = 667 rubles

2 month 1500 belts produced - 666667+16667+150000+750000/2500 =633 rubles

3 month 1200 belts produced -1583334+16667+150000+600000/3700 ​​= 635 rubles

As you can see, the marginal cost directly depends on the quantity of products produced and shows how effective it is to increase production in the future. Average reflects the current state of production, trade or provision of services.

There is a huge amount different types cost, in fact, its type depends on the owner’s desire to control this or that area of ​​work, the main classification looks like this:

• Shop price – this refers to the cost of individual sections of the production cycle. Transferring it to a small business, we can recall the production of fried sunflower seeds, where you can keep separate records of the cost of the frying process and separately the process of packaging the products;
• General business cost (or indirect) - this includes all expenses associated with managing and maintaining the business as a whole, things that are not directly related to the production process (for example, a cleaner or lawyer’s services, etc.).
• Production cost is the sum of workshop and general economic costs;
• Full cost - it is calculated as the sum of production and plus expenses associated with the promotion of goods (advertising, delivery, promotions, presentations), depreciation and, of course, start-up capital (in a proportional breakdown.

Cost structure for business

Regarding the cost structure, two main points can be distinguished:

• Firstly, there is the so-called net cost structure. This gradation is developed and maintained as a cumulative total of total expenses for individual directions(blocks or articles). It can be noted that the gradation is designed for big business, for small individual entrepreneurs or LLCs such a complex system is not needed. True, for a full analysis and, especially, drawing up a business plan, it is worth using an expanded structure.

1. Raw materials involved in the main production (activity) include materials, components, semi-finished products, units, components
2. Energy costs - gasoline, diesel fuel, electricity, other types of fuel (in certain types production is one of the most significant expense items).
3. Depreciation of fixed assets - equipment, machines, appliances, display cases, refrigerators, shelving.
4. Salaries of key personnel, including obligatory payments and taxes
5. General production expenses – wage service personnel, advertising costs, office maintenance, and so on.
6. Work of third-party organizations (contractors), outsourcing or simply contract agreements
7. Administrative expenses - expenses for maintaining the management apparatus, paying taxes.

In addition, the cost price is taken classify by elements of production costs, while a separate article or block may contain several different elements.

The main elements of cost costs:

• costs associated with preparation production capacity, launch;
• costs reflecting investments in technology, production, management decisions;
• investments in the development of the scientific and technical base, development projects, research;
• costs reflecting the service component of the process of releasing goods;
• investments in improving working conditions;
• salary, vacation pay, social contributions;
• mandatory (insurance) payments (contributions);
• acquisition of fixed assets, depreciation;
• purchase of raw materials;
• other costs (including social costs, including “resolution of the issue”);

How to calculate your own cost

In fact, independently calculating the cost of a specific business is not difficult, but the trick, as always, is in the details:

• First, it is necessary to keep full records of activities, and this means not accounting for taxation (this was discussed in the article and), namely economic activity. In Russia, accounting and, as a consequence, costing and tax accounting of costs are two different things.
• Secondly, cost accounting should be carried out by blocks, that is, costs of core activities and management costs (general). By the way, this also applies to costing for stores.
• Third, after summing up the general results, that is, calculating how much was spent, it is imperative to transfer it in the context of sold or produced products. This will give you the opportunity to see the real profitability of the business. That is why when they say that the markup in trade is 100-150%, this absolutely does not mean that the profitability of the business is the same. If we remove from the markup the costs associated with the sale of products and defects (losses), the markup will decrease to 50-70%, alas, the costs in this business are high.

Ultimately, you will reach your real business profitability indicators, which is very important for any startup.

I often hear the question, how much is cost related to production volume?

There is no definite answer here; it all depends on how high the share of general business expenses is, that is, costs not directly related to production.

For example, if you built own greenhouse and you grow cucumbers in it, at the same time (which gives you the right not to pay taxes), then the level of general economic costs will be minimal, you can even order that there will be no such costs at all. Accordingly, volumes practically do not affect the cost, another thing is when there is a company with staff, paying taxes, then in this case such an influence will be traced and the larger the production, the more noticeable this process.

That's all, if you have any questions, ask

Interesting on this topic

Example 1. Within a month, finished products were accepted for accounting at the warehouse, the planned cost of which was 75,000 rubles. The cost of products sold at planned prices was 50,000 rubles. The total amount of costs recorded in the debit of account 20 “Main production” during the month is 90,000 rubles.

A) The balance of work in progress at the end of the month is 18,000 rubles.

Actual cost finished products: 90,000 – 18,000 = 72,000 rubles.

The amount of deviation of the actual cost from the planned one: 75,000 – 72,000 = 3,000 rubles.

The actual cost is less than the planned cost, so the amount of savings must be reversed.

The amount of deviation attributable to products sold: (3,000: 75,000) x 50,000 = 2,000 rubles.

Actual cost of products sold: 50,000 – 2,000 = 48,000 rubles.

Balance of finished products in the warehouse (at actual cost): 72,000 – 48,000 = 24,000 rubles.

B) The balance of work in progress at the end of the month is 12,000 rubles.

Actual cost of finished products: 90,000 – 12,000 = 78,000 rubles.

The amount of deviation of the actual cost from the planned one: 78,000 – 75,000 = 3,000 rubles.

The actual cost is higher than the planned cost, so additional entries need to be made for the amount of overrun.

The amount of variance attributable to products sold:

(3,000: 75,000) x 50,000 = 2,000 rubles.

The amount of deviation attributable to the balance of finished products in the warehouse: (3,000: 75,000) x 25,000 = 1,000 rubles.

Actual cost of products sold: 50,000 + 2,000 = 52,000 rubles.

Balance of finished products in the warehouse (at actual cost): 78,000 – 52,000 = 26,000 rubles.

Example 2. The balance of finished products in the warehouse at the beginning of the month is 60,000 rubles at planned prices, the amount of deviations is 5,000 rubles (overexpenditure). Within a month, products at planned prices in the amount of 200,000 rubles were accepted for accounting at the warehouse. The amount of production costs recorded on account 20 “Main production” amounted to 280,000 rubles, the balance of work in progress – 70,000 rubles. The planned cost of products sold is 230,000 rubles.

Actual cost of finished products: 280,000 – 70,000 = 210,000 rubles.

Amount of deviations for products transferred to the warehouse: 210,000 – 200,000 = 10,000 rubles.

Percentage of deviations for shipped products: (5,000 + 10,000) : (60,000 + 200,000) x 100% = 5.77%.

The amount of deviations attributable to shipped products: 230,000 x 5.77% = 13,271 rubles.

Actual cost of shipped products: 230,000 + 13,271 = 243,271 rubles.

Balance of finished products at the end of the month at actual cost: (60,000 + 5,000) + (200,000 + 10,000) – (230,000 + 13,271) = 31,729 rubles, including:

planned cost: 60,000 + 200,000 – 230,000 = 30,000 rubles.

amount of deviations: 5,000 + 10,000 – 13,271 = 1,729 rubles.

Example 3. The balance of finished products in the warehouse at the beginning of the month is 60,000 rubles at planned prices. Within a month, products at planned prices in the amount of 200,000 rubles were accepted for accounting at the warehouse. The amount of production costs recorded on account 20 “Main production” amounted to 280,000 rubles, the balance of work in progress – 70,000 rubles. The planned cost of products sold is 230,000 rubles.

The balance of finished products in the warehouse at planned prices: 60,000 + 200,000 – 230,000 = 30,000 rubles.

Example 4. Costs recorded during the month on account 20 “Main production” amounted to 250,000 rubles. The balance of work in progress is 80,000 rubles. All finished products were sold in the same month.

It should be noted that this method is convenient for use only in cases where all products produced in the reporting period were sold during the same period. Otherwise, there is a need to account for unsold finished products as part of work in progress on account 20 “Main production”.

For those who have decided to start their own business, it will be necessary to study the question of how to calculate the full cost of production. This is important for its implementation. In order to understand this issue, you need to clearly understand what the cost of a product is.

Concept of cost

Cost is the total and partial amount of costs for the production and sale of a product. When producing a product, the following resources are required:

• the material from which the product is directly produced;
• fuel necessary for transporting materials for manufacturing or transporting finished products to points of sale;
• repair work;
• workers' wages;
• rental of premises, if required.

Each product is individual and requires its own resources for production. And to figure out how to calculate the cost of production, you need to take into account each stage separately.

Economic concepts of cost

Full cost

This is the ratio of all costs to total production. This calculation is suitable for mass production. Costs include:

1. Employees' salaries.
2. Deductions to government funds.
3. Raw materials used to manufacture products.
4. Accounting for equipment wear and tear and repair costs (depreciation).
5. Advertising expenses.
6. Other expenses.

It is these costs that determine how to calculate the cost of finished products. Typically used in large, large-scale enterprises.

Marginal cost

This concept includes the cost of a manufactured unit of production. How to calculate the actual cost of finished products (also called full cost)? This can be done using the formula, but for this you need:

1. Calculate how many raw materials and materials are used to produce one copy of the product.
2. Calculate how much fuel, lubricants and electricity are consumed per unit of product.
3. Take into account the costs of semi-finished products purchased from other factories, if any.
4. Calculate how much an employee will receive by producing this type of product (taking into account all social benefits).
5. Know the costs of repairs and depreciation of equipment.
6. Take tool wear into account.
7. Calculate the costs of maintaining the production premises.
8. Other costs.

After analyzing the data above, you can imagine how much raw material is needed to produce a unit of product. And if we add to all this: transportation; contributions to state funds; vacation pay for employees; taxes; expenses incurred by the organization due to unforeseen circumstances - all this will give you a complete picture of how to calculate the actual cost of production.

Types of cost

In addition to the main types of cost, there are also types characteristic of a particular production.

1. Aggregate cost. The cost of manufacturing a product on a specific machine, be it a technical machine or a woven machine, is estimated.
2. Prime cost. In addition to estimating the costs of producing products in a workshop, the costs of maintaining and maintaining the territory itself are also taken into account: heating, security, alarm, fire protection, management structure.
3. General production costs. Consist of costs for depreciation and repair of equipment, advanced training of workers, taxes.
4. Full cost. Among other expenses, it includes costs for packaging, loading and unloading of products, and transportation services.

Why do you need to calculate the cost of production?

When opening their own business, not everyone rushes to immediately calculate the cost of production, thereby making a huge mistake. This mistake can lead you to at least losses, and at most to complete bankruptcy.

What a cost analysis will give you:

1. Shows the profitability of all your products. After all, it depends on it how efficiently raw materials and other, monetary and human, resources will be used.
2. Generates retail and wholesale prices. The correct effective pricing policy will allow you to make production competitive.
3. It will make it clear how efficiently the production process at the enterprise operates. The lower the cost of production is compared to the average statistical data in this industry, the more efficiently the company will work. Accordingly, the higher the costs, the lower the profitability and efficiency of the enterprise.
4. Will generate an indicator for reducing fixed and variable costs.

Your profit depends on the cost calculation. A circular system operates here: the lower the cost, the greater the profit, and the higher the cost, the less profit. Therefore, every manufacturer strives to reduce production costs in pursuit of profit. At the same time, the quality of the product may suffer. In order to properly run your business, you definitely need to calculate the cost of products; this is one of the main management elements in the enterprise.

How to calculate the cost of production using the example of a furniture workshop

As an example will be taken furniture company LLC "Divan" It is required to calculate the cost of a manufactured product for December. A total of 12 corner sofas, 10 book sofas, and 24 easy chairs were produced.

Total:

1. The cost of one corner sofa is: 265,320: 12 = 22,110 rubles.
2. The cost of one book sofa is: 101,500: 10 = 10,150 rubles.
3. The cost of one chair is: 115,480: 24 = 4,812 rubles.

How to calculate cost of goods sold

Let's take as an example a sofa manufacturing company we are already familiar with. In December, ten corner sofas, seven book sofas and twenty armchairs were sold.

Let's use the data above and calculate:

1. Ten corner sofas cost us 221,100 rubles (22,110 x 10).
2. Seven book sofas - 71,050 rubles (10,150 x 7).
3. Twenty chairs - 96,240 rubles (4812 x 20).

The total amount was: 388,390 rubles.

Cost Features

In the process of its work, each organization strives to minimize its production costs. Therefore, the question of how to calculate the cost of production will depend on a number of factors. All costs are directly included in the cost of production, including heating the premises in the winter (in summer period absent). All this allows us to judge that the main management mechanism is the analysis and accounting of all aspects of the organization’s economic activities, which will allow us to judge proper operation companies. In this case, a specific estimate of the cost will depend on the inventory, technological features of the enterprise and on the managers themselves, who own this or that information about production.

Each enterprise has its own calculation method. For example, production confectionery according to the costing system will differ significantly from the cost calculation method in a furniture factory. In the first case, electricity and shelf life will be of paramount importance (special attention must be paid to it), and in the second case, large financial resources spent on raw materials and transportation of large-sized products will come first. And, accordingly, for an enterprise producing sweet products, the calculation method is one, and for upholstered furniture - another.

Hello! Many people ask the question: what is the cost of goods or products? To produce any goods, a number of different resources are spent: natural, energy, land, financial, labor, etc. The sum of all costs incurred will be the cost of production. We will look at this issue in more detail in this article!

What is the cost of goods

First, let's look at determining the cost of a product.

Product cost - this is a monetary assessment of the current costs of an enterprise for the production and sale of goods, as well as the actual cost of labor and financial resources.

In fact, cost is an indicator of the production and economic activity of a company, reflecting the financial costs of the organization for the production of products. The price of the product directly depends on the cost. The lower the cost of finished products, the higher the profitability of the enterprise.

How to determine the cost of goods

Depending on the method of accounting for expenses, several methods for calculating the cost of goods have been formed: standard, process-by-process, assignment-by-product, order-by-order. In turn, the cost is also divided into several types: gross, commodity and sold.

What is included in the cost of goods

Surely every novice entrepreneur has at least once asked the question: why do we need cost? And it is needed in order to objectively assess the profitability of an enterprise, determine the wholesale and retail price of a product, and give an objective assessment of the efficiency of expenditure and use of resources.

The cost of goods takes into account many indicators, depending on what exactly needs to be controlled.

The unit cost of a product directly depends on the quantity of products produced or purchased. To understand this, just consider a simple example:

Let's say you went to the store to buy a pack of tea worth 100 rubles. Then the cost calculation will take the following form:

• Let’s assume you spent 1 hour on the trip (assuming the estimated cost of a working hour is 100 rubles);
• The estimated depreciation of the car was 15 rubles.

Therefore, the cost of goods includes: Cost of a batch of goods (in this case, a pack of tea) + Costs) / Quantity = 215 rubles.

The picture will change significantly if you buy not one pack of tea, but, say, five:

Cost = ((5*100)+100+15)/5 = 123 rubles.

The example clearly shows that it directly depends on the quantity of products purchased - the more quantity you purchase (or produce), the cheaper each unit costs you. No enterprise is interested in increasing the cost of goods.

Types of product costs

Essentially, cost is the sum of all costs associated with the production and release of goods. The cost price can be calculated both for the entire product produced and for a separate product unit.

Strictly speaking, there are several types of cost, and, depending on what specific area of ​​activity the entrepreneur wants to control, the following indicators can be calculated:

• Shop floor, containing the costs of all departments of the organization aimed at manufacturing products;
• Production, including shop cost, as well as general and target expenses;
• Complete, consisting of production costs and costs of selling products;
• General business expenses, which include expenses not directly related to production process, but aimed at doing business.

Production cost contains all the resources spent at the production stage, namely:

• Costs of purchasing raw materials and basic materials for manufacturing products;
• Costs of fuel and energy supply for production;
• Payments to employees of the enterprise;
• Costs of internal movement of raw materials and materials;
• Maintenance, Maintenance and maintenance of fixed assets of the enterprise;
• Depreciation of equipment and fixed assets.

Realized cost implies the costs of the enterprise at the stage of sales of goods, namely:

• Costs for packaging/packaging/preservation of products;
• Costs of transporting goods to the distributor’s warehouse or to the direct buyer;
• Product advertising costs.

The total cost of a product consists of production and sales costs. This indicator also takes into account the costs of purchasing equipment.

Administration costs entrepreneurial activity and is usually divided into certain periods during which these costs must pay for themselves. Such costs are added in equal shares to the total costs of production and sales of products and are included in the concept of total cost.

There is also a planned cost, this is the average estimated cost of manufactured products manufactured in planning period(for example, per year). This cost is calculated if there are consumption standards for the use of materials, energy resources, equipment, etc.

To determine the cost of one unit of finished products, a concept such as marginal cost is used. This indicator directly depends on the quantity of products produced and reflects the effectiveness of further expansion of production.

In addition to the cost of production, there is also

The cost structure is classified according to costing items and cost elements.

By calculation items:

• Raw materials, materials, components, semi-finished products, units, etc., necessary for the production of goods;
• Fuel and energy resources spent on production;
• Depreciation of fixed assets of an enterprise or fixed assets (equipment, equipment, machinery, etc.), costs of their maintenance and maintenance;
• Remuneration of key personnel (salary or tariff);
• Additional remuneration for personnel (bonuses, additional payments, allowances paid in accordance with the law);
• Contributions to various off-budget funds(For example, Pension Fund, social insurance fund, etc.);
• Production costs in general (sales costs, transportation costs, payroll for company employees, etc.);
• Business travel expenses (ticket cost, hotel payment, daily allowance);
• Payment for the work of third parties;
• Costs of maintaining the administrative apparatus.

By cost element:

• Costs of materials (raw materials, parts, components, fuel and energy resources, general production costs, etc.);
• Costs of wages of employees (wages of workers, auxiliary personnel, for example, those servicing equipment, wages of engineers, employees, i.e. executives, managers, accountants, etc., junior service personnel);
• Contributions to social institutions;
• Depreciation of fixed assets of an enterprise;
• Other expenses aimed at advertising, sales, marketing, etc.).

General production costs are usually understood as the organization's expenses for paying wages to management, paying for security, travel expenses, as well as paying for the management department. This expense item also includes depreciation and maintenance of buildings and structures, labor protection, training and education of specialists.

The figure shows approximate items of expenditure of an enterprise for production.

Theory of Constraints

According to this theory, there are certain significant costs that do not depend on the quantity of output. Such costs include loan payments, rent payments and payroll for permanent employees. If there are such fixed costs, the use of product cost as an indicator becomes a limiter on the economic policy of the enterprise, which can lead to illogical decisions. For example, a product sold below cost is discontinued, which in turn increases the cost of other goods produced.

Methods for calculating the cost of goods

There is no single methodology for calculating cost as such. This indicator can be calculated in completely different ways, depending on the type of product, the method and technology of its production and many other factors.

As a rule, in order to calculate the cost of production, the following factors must be taken into account:

• The amount of all expenses for production and sales of products;
• Manufacturer's costs of operating as an entrepreneur;
• Costs associated with preparation of documentation for products.

It is necessary to keep records of the cost of goods directly for a certain production cycle of products. In order to determine the price of a product, you need to calculate the cost. It is compiled based on the quantity of products produced (in pieces, meters, tons, etc.). The cost estimate must reflect absolutely all costs associated with production. (Which items are included in the calculation are described in the paragraph “Cost structure”).

Method No. 1

Full addition of expenses to the cost price. The cost price can be full or truncated. At full cost, all expenses of the enterprise are taken into account. When truncated, the cost per unit of production is variable costs. A constant share of overhead costs is applied to the reduction of profits at the end of the established period and is not distributed to the goods produced.

With this method of determining cost, this indicator is influenced by both variable and fixed costs. When added to cost required profitability the price of the product is determined.

Method No. 2

In this method, actual and standard costs are calculated based on the expenses incurred by the enterprise. Standard cost allows you to control the costs of raw materials and materials, and, in case of deviations from the norms, take appropriate measures. This method is very labor intensive.

Method No. 3

Transverse method. It is convenient for use in enterprises with serial or continuous production, in which the products undergo several stages of processing.

Method No. 4

The processor method is used mainly in mining industry enterprises.

So, to calculate the total cost of production, we will use the following algorithm:

1. We calculate variable costs to produce one unit of product taking into account costs;
2. Of the general plant costs, we highlight those that relate to this species products.
3. Let's sum up all expenses not directly related to the production process.

The resulting value will be the cost of the finished product.

Since there are several types of cost, one calculation formula is not enough.

Production costs:

C = MZ+A+Tr+ other expenses

Where C is the cost of expenses;

MH – material costs of the organization;

A – depreciation charges;

Tr – expenses for salaries of company employees.

To get the full cost of the finished product, you need to add together all the costs of its production:

Where PS is the total cost;

PRS - production cost of goods, which is calculated based on production costs (costs of materials and raw materials, depreciation production assets, social and other contributions);

РР — costs of selling goods (packaging, storage, transportation, advertising).

The cost of goods sold is calculated using the formula:

Where PS is the total cost,

CR – costs associated with commercial activities enterprises,

OP – remains of unsold products.

Gross cost is defined as:

C = Production costs - non-production costs - future costs

If an enterprise produces only one type of product, then its cost and price can be determined using the calculation method. In this case, the unit price of a product is obtained by dividing the sum of all expenses spent on production by the number of products produced. It is worth remembering that all calculations are made for a certain specified period.

Calculation and analysis of the cost of goods produced large enterprise, a very complex and labor-intensive process that requires certain knowledge, so an accountant solves such problems. In this case, it is customary to divide costs into direct and indirect.

The most common way to determine the price of a product is to calculate the cost of production, since this method allows you to calculate the costs of producing a single unit of product.

Cost classification

Depending on what task you want to implement, costs are classified as follows:

1. There are two types of expenses that are usually added to the cost finished goods. These are direct costs (these costs are added to the cost of finished products in an exact or single way) and indirect costs (costs added to the subject of calculation according to the methodology established at the enterprise). Indirect costs include general business, general production and commercial costs;
2. Depending on the quantity or volume of products produced, costs are:

• Constant (independent of the volume of goods produced), indicated per unit of production;
• Variables (depending on production or sales volume);

1. There are also costs that are significant for a particular case. Such as relevant (depending on the decisions made) and irrelevant (not related to the decisions made).

All of the above indicators of costs and expenses significantly influence the formation of the price of the product. But there is another important indicator - tax deductions.

Theoretically, it is quite acceptable to use the term “costs” as a synonym for cost. Both are the valuation of all invested funds necessary for the manufacture and marketing of products. They directly affect the profit of the enterprise: when they grow, the profitability of the business falls.

What it is?

The total costs of an enterprise consist of two parts:

• costs directly for production – production cost ;
• sales costs finished products – cost of sales.

These two indicators add up to full cost, which is also called average. It is calculated for the entire volume of production and sales. If it is divided by the number of units manufactured, the costs for an individual product will be determined. They determine the production costs of each subsequent unit. This marginal cost.

Production costs comprise all expenses for organizing the production process. Mainly they include:

• costs of raw materials, materials used;
• payments for fuel, electricity;
• salaries of all employees of the enterprise;
• deductions for the repair of fixed assets and their maintenance;
• costs of insurance, storage of goods in warehouses;
• depreciation of fixed assets;
• mandatory contributions to various state funds (pension, etc.).

Sales costs include costs at the stage of marketing finished products. This is first of all:

• expenses for packaging finished products;
• transportation costs for delivering them to the distribution warehouse or to the buyer;
• marketing costs and other expenses.

Calculation methods

There are many ways to calculate the indicator. Each one approaches a specific enterprise taking into account its production technology, specifics, and characteristics of the products produced. Accounting selects the most suitable option.

For constant analysis costs, the two most common methods are used. All the rest are their varieties.

Process method

It is used in industries with a massive continuous type of production: primarily by energy, transport, and mining industries. They are characterized by the following factors:

• Limited nomenclature.
• Products have uniform properties and characteristics.
• Short production cycle.
• Insignificant volumes of work in progress, semi-finished products or their complete absence.
• The object of calculation is the final product.

In the complete absence of stocks of finished products, such as, for example, energy enterprises, it is convenient to use a simple calculation formula:

C=Z/X, Where

• C – unit cost of production;
• Z – total costs for a specific period;
• X is the number of units of production produced during the same period of time.

Normative method

Used in serial and mass production with constantly repeating operations. There, every month, quarter, year, the ratio of standard and planned costs is checked, and if they do not correspond, appropriate adjustments are made.

Cost standards are usually developed based on data from previous years. The advantage of the method is to prevent the waste of financial, material and labor resources.

Custom method

Here, the object of calculation is a separate order or work that is performed to meet the customer’s requirements. This method is used:

• in single or small-scale production, in which each unit of expenditure differs from all others made previously;
• in the manufacture of large, complex products with long production cycles.

It is used by enterprises of heavy engineering, construction, science, furniture industry, repair work. For each individual order, costs are individually determined using a costing card, which is constantly adjusted in connection with current changes in any costs.

The disadvantage of this method is that there is no operational control over the level of spending, and the complexity of inventory of work in progress.

Calculation method

It is selected by each enterprise depending on the characteristics of its production and product. For example, in a confectionery factory, when choosing a costing method, the shelf life of the products and the associated energy costs are of paramount importance. For a furniture manufacturing company the most important factors are heavy expenses for materials, as well as for the transportation of large goods.

Costing is a statement for calculating costs for an individual unit of production. In it, all expenses for homogeneous elements are grouped into individual articles, of which the most important are:

• Payment for the energy and fuel needed to produce.
• Cost of semi-finished products supplied from other enterprises.
• Depreciation of equipment, wear of fixtures, tools.
• Salaries, social benefits for employees.
• Total production costs for the workshop.

The itemized calculation method is used to calculate the so-called shop cost. To do this, the sum of all costing costs should be divided by the number of units of the product produced. This, in fact, will be the production costs of each individual product.

They are inversely related to production volumes. The more products a workshop produces, the lower the production costs per unit product. This is the essence of the so-called economies of scale.

Transverse method

It is acceptable for production with several completed stages of processing of raw materials and materials. At each stage, semi-finished products are produced, which are used internally or sold to other enterprises.

Costs are calculated at each stage, but there is only one indicator for the finished final product.

Method of averages

Its essence is in calculating the share of specific costing items in the structure of the total cost. This allows you to determine how changes in certain costs affect the efficiency of the entire production.

If, for example, the share transport costs the highest, then their variability will have the greatest impact on the overall final result.

You can get detailed information about how to calculate the indicator from the following video:

Cost of services

The calculation of an indicator in the service sector can include many variable economic factors. The final service product does not always require costs for materials, components, and transportation to the point of consumption. Often its profitability depends on the availability of clientele and their orders.

The cost of a service is all the contractor’s expenses without which the work cannot be completed. They include:

• Direct costs that depend directly on the performance of the service. This is primarily staff salaries.
• Indirect costs are management salaries.
• Constant payments that do not depend on the volume of services performed. These include utility bills, equipment depreciation, and contributions to the pension fund.
• Variable expenses - for example, the purchase of materials - are directly dependent on the number of services provided.

The need to analyze the indicator

Cost calculation is mandatory, since on its basis the following is carried out:

• planning work and monitoring the implementation of plans;
• preparation of financial statements;
• analysis economic efficiency the enterprise, all its structural divisions;
• compiling data for financial reporting on finished and sold products and work in progress.

Without calculation it is impossible to adopt effective management decisions. On its basis, a competitive price for the manufactured product is developed, a successful assortment policy, which will ensure high production profitability and business profitability.