What are costs? Main types of production costs What does total costs mean?

No activity is possible without costs. Costs are one of the indicators of the efficiency and intensity of resource consumption. The profitability of the organization depends on their size. One of the requirements for managers of commercial enterprises is the rational use of resources. To achieve this goal, it is necessary to be able to calculate, analyze and optimize the company's costs. You will learn how to do this correctly from our article.

Definition

Costs are the costs of producing, transporting and storing goods. Their value depends on the prices of consumed resources. Stocks of the latter are limited. Using some resources means abandoning others. From this we can conclude that all costs of the company are alternative in nature. For example, steel used in automobile manufacturing is lost to machine tools. And the labor costs of a mechanic are equivalent to his contribution to the production of, for example, refrigerators.

Types of expenses

External (monetary) costs are the company's costs for production factors (wages, purchase of raw materials, social needs, rent of premises, etc.). The purpose of these payments is to attract a certain amount of resources. This will lead to them being distracted from alternative use cases. Such expenses are also called accounting expenses.

Internal (implicit) costs are the costs of the company's own resources (cash, equipment, etc.). That is, if an organization is located in premises that it owns, then it loses the opportunity to rent it out and receive income from it. Although internal costs are hidden and are not reflected in accounting, they must still be taken into account when making management decisions.

The second type of cost also includes “normal profit” - the minimum income that an entrepreneur must receive in order to be able to continue to engage in this business. It must be no less than the remuneration from an alternative type of activity.

Business costs include:

accounting expenses;
normal profit;
customs duties, if any.

Alternative classification

Implicit costs are hidden, but they still need to be taken into account. The situation is different with sunk costs: they are visible, but they are always ignored. These are expenses that were made in the past and cannot be changed in the present. An example of such costs is the purchase of custom-made machinery that can be used to produce one type of product. The cost of manufacturing such a machine is considered a sunk cost. The opportunity cost in this case is zero. This type also includes R&D, marketing research, etc. There are also preventable costs, that is, those that can be prevented: “promotion” of a new product in the media, etc.

Since the magnitude of external and internal costs does not coincide, there are differences in the volumes of accounting and economic profits. The first represents sales revenue minus explicit cash costs. Economic profit is the difference between sales revenue and all costs.

Types of costs in the short term

In the short term, all costs are divided into fixed and variable. It is important to distinguish between total costs for the entire volume of production and per unit - average costs. Let's look at each type in detail.

Fixed (FC) costs do not depend on the volume of manufactured products (Q) and appear before the start of production: equipment depreciation, security salaries, etc. They are also called the costs of creating operating conditions. That is, if production volume decreases by 20%, the amount of such costs will not change.

Variable (VC) costs change depending on the workload of production: materials, workers' salaries, transportation, etc. For example, metal costs in a pipe rolling plant will increase by 5% with an increase in pipe production volumes by 5%. That is, changes occur proportionally.

Total costs: TC = FC + VC.

The amount of fixed and variable costs changes with the growth of production volume, but not equally. In the early stages of an organization's development, they grow rapidly. As production volumes increase, their pace slows down.

Average costs

Specific fixed (AFC) and variable (AVC) costs are also calculated per unit of output:

As production rates increase, fixed costs are distributed over the entire volume, and AFC decreases. But variable unit costs first decrease to a minimum, and then, under the influence of the law of diminishing returns, begin to increase. Total costs are also calculated per unit of production:

Unit total costs change in a similar way. While average constants (AFC) and average variables (AVC) decrease, ATC also decreases. And with increasing production, these values also increase.

Additional classification

For the purposes of economic analysis, an indicator such as marginal cost (MC) is used. It represents the increase in costs for the production of an additional unit of the product:

MC = A TCn - A TCn-l.

Marginal cost determines how much a firm will pay to increase its output by one unit. The organization can influence the amount of these costs.

It is important to be able to calculate all the types of costs considered.

Data processing

Cost analysis shows:

when M.C.< AVC + ATC, изготовление дополнительной единицы продукции снижает удельные переменные и общие затраты;
when MC > AVC + ATC, producing an additional unit increases average variable and total costs;
when MC = AVC + ATC, unit variables and total costs are minimal.

Long-term cost calculation

The costs discussed above related to decisions that need to be made immediately. For example, to determine how much production of goods that will be sold at a discount can be increased. In the long term, an organization can change all factors of production, that is, all costs become variable. But if the enterprise reaches a volume at which ATC increases, then it is necessary to adjust the constant factors of production.

Based on the ratio of the rate of change in production costs and production volume, the following are distinguished:

positive returns - production growth rates are higher than total costs. Unit costs are reduced;
Diminishing returns - costs increase faster than production. Unit costs are increasing;
constant return - the growth rates of production and expenses approximately coincide.

Positive returns to scale are due to the fact that:

specialization of labor in large-scale production reduces costs;
It is possible to use waste from the main production to produce additional products.

The negative effect is caused by an increase in management costs and a decrease in the efficiency of interaction between departments.

While the positive effect dominates, average long-term costs decrease, in the opposite situation they increase, and when they are equal, the costs practically do not change.

Pricing

Production costs are the expenditure of all factors of production expressed in monetary terms. This is a very important indicator that is used to calculate the price. Costs and profits are closely related. Therefore, the main goal of cost analysis is to identify the optimal relationship between these indicators.

Classification of expenses makes economic sense and is used in practice to solve the following problems:

assessment of the organization's competitiveness;
regulating profit growth by reducing certain categories of expenses;
definitions of “margin of financial strength”;
calculating product prices through marginal costs.

To maintain an optimal pricing policy in the market, it is necessary to constantly analyze the level of costs. For this purpose, it is customary to calculate gross costs (AC) per unit of item. The curve of these costs on the graph has a U-shape. At the first stages, costs are high, since large fixed costs are distributed over a small volume of items. As the AVC rate increases per unit, costs decrease and reach their minimum. When the law of diminishing returns begins to operate, that is, the level of costs is more influenced by variable costs, the curve will begin to move upward. Firms with different scales, levels of scientific and technical progress, and volumes of costs simultaneously operate in the same industry. Therefore, a comparison of average costs allows us to assess the organization’s position in the market.

Example

Let's calculate various types of costs and their changes using the example of a closed joint stock company.

Expenses							Deviations (2011 and 2012)
Expenses	amount, thousand rubles	beat weight, %	amount, thousand rubles	beat weight, %	amount, thousand rubles	beat weight, %	amount, thousand rubles	beat weight, %
Raw materials
Salary
Social Security contributions
Depreciation
Other expenses
TOTAL

The table shows that the largest share falls on other expenses. In 2012, their share decreased by 0.8%. At the same time, there was a decrease in material costs by 1%. But the share of wage payments increased by 1.3%. The least expenses are for depreciation and social contributions.

The large share of other costs can be explained by the specifics of the enterprise's activities. This category includes payment for various services to third parties, which is associated with the sale of goods: reception, storage, transportation of raw materials, etc.

Now let's look at the impact of turnover on costs. To do this, it is necessary to calculate the absolute value of deviations, divide them into constants and variables, and then analyze the dynamics.

Index	Deviation, thousand rubles	Growth rate, %
Trade turnover, t. rub.
Distribution costs, thousand rubles.
Level of costs to turnover
Variable costs, thousand rubles.
Fixed costs, thousand rubles.

A reduction in trade turnover by 31.9% led to a reduction in distribution costs by 18 thousand rubles. But these same costs in relation to trade turnover increased by 5.18%. The following table shows how production volume affects the largest cost items.

Title of articles	Periods				The amount of costs recalculated to the product, thousand rubles.	Change, thousand rubles
						absolute deviation	Including
	amount, thousand rubles	% to product	amount, thousand rubles	% to product			at the expense of the goods	overspending
Fare
Shipment from warehouse
Drying
Storage
Shipment
Total
Trade turnover

Decrease in trade turnover by 220 million rubles. led to a reduction in variable costs by an average of 1%. At the same time, almost all cost items in absolute terms decreased by 4-7 thousand rubles. In total, overexpenditure was received in the amount of 22.9 million rubles.

How to reduce costs

Reducing costs requires capital, labor and finance. This step is justified when the beneficial effect of the product increases or the price decreases in competition.

Cost reduction is affected by changes:

trade turnover structures;
time of circulation of goods;
prices for goods;
labor productivity;
efficiency of operation of the material and technical base;
level of scientific and technical progress at the enterprise;
conditions of implementation.

Ways to increase the level of scientific and technical progress:

full use of production capacity (economical consumption of materials and fuel);
creation of new machines, equipment and technologies.

The development of resource-saving technologies in Russia has been going on for 20 years. But with the development of market relations, the implementation of scientific and technological progress developments at industrial enterprises slowed down. Therefore, in the current conditions, it is more appropriate to optimize labor productivity. Expert calculations have shown that its growth depends by 40% on the improvement of technology and 60% on the human factor.

It is very important to correctly determine methods for encouraging staff. E. Mayo believed that any motivation is based on the satisfaction of social needs. During experiments conducted in 1924-1936. at the Western Electric plant in Illinois, the sociologist was able to prove that informal relationships between employees are more important than working conditions or material incentives. Modern researchers argue that social significance itself is very important for a person. If it is complemented by the opportunity to help people and be useful, then productivity increases without material costs. This area of incentives is especially important for employees who work according to their calling. But that doesn't mean competitive wages don't matter. Wages should increase with increasing production efficiency.

Summary

Costs and profits are closely related. It is impossible to generate income without expending capital, human or material resources. In order to increase profit levels, costs must be correctly calculated and analyzed. There are many different classifications, but the most important of them is the division of costs into fixed and variable. The former do not depend on the volume of output and exist to ensure working conditions. The latter change in proportion to the rate of production growth.

Fixed and variable costs are the costs that a company incurs to produce goods, work or services. Their planning allows for more efficient use of available resources, as well as forecasting activities for the future.

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Fixed costs remain unchanged if the organization reduces production volume. In this case, the share of fixed costs per unit of production will increase. And vice versa - with an increase in production volumes, the share of fixed costs per unit of production will decrease. This indicator is average fixed costs (AFC).

Graphically, fixed costs can be represented as a straight line, since they remain unchanged with any changes in production (Fig. 1). Cm. .

Picture 1. Direct Cost Schedule

Variable costs

Variable costs depend on increases or decreases in production volumes. If an organization increases the number of products produced, the costs of materials and resources required for this increase accordingly.

Examples of variable costs:

Wages of workers with a piece-rate wage system.
Costs of raw materials and materials.
Transportation costs for delivering products to the consumer.
Electricity costs, etc.

More on the topic:

How it will help: Find out which expenses should be cut. It will tell you how to audit business processes and inventory costs, and how to motivate employees to save.

How it will help: prepare a report in Excel on the expenses of a group of companies in the required detail - by business units, areas, items and periods

Variable costs change depending on changes in production volumes. With an increase in the number of products produced, variable costs will increase and, conversely, with a decrease in the number of products produced, they will decrease. Cm. .

The variable costs schedule looks like this - Fig. 2.

Figure 2. Variable cost schedule

At the initial stage, the growth of variable costs is directly related to the number of products produced. Gradually, the growth of variable costs is slowing down, which is associated with cost savings in mass production.

General costs

The sum of all costs, fixed and variable, that an organization spends on the production of goods or provision of services is called total costs (TC – total costs). They depend on the number of production volumes and the cost of resources spent on production. Graphically, total costs (TC) look like this - Fig. 3.

Figure 3.Graph of fixed, variable and total costs

An example of calculating fixed and variable costs

The company OJSC "Sewing Master" is engaged in sewing and selling clothes wholesale and retail. At the beginning of the year, the organization won the tender and entered into a long-term contract for a period of 1 year - a large order for sewing workwear for medical workers in the amount of 5,000 units per year. The organization incurred the following costs during the year (see table).

Table. Company costs

Type of costs	Amount, rub.
Rent of a sewing workshop	50,000 rub. per month
Depreciation charges according to accounting data	48,000 rub. in a year
Interest on a loan for the purchase of sewing equipment and necessary materials (fabrics, threads, sewing accessories, etc.)	84,000 rub. in a year
Utility costs for electricity, water supply	18,500 rub. per month
Cost of materials for sewing workwear (fabrics, threads, buttons and other accessories)
Remuneration of workers (workshop staff amounted to 12 people) with an average salary of 30,000 rubles.	360,000 rub. per month
Remuneration of administrative personnel (3 people) with an average salary of 45,000 rubles.	135,000 rub. per month
Cost of sewing equipment

Fixed costs include:

rent for a sewing workshop;
depreciation deductions;
payment of interest on a loan for the purchase of equipment;
the cost of the sewing equipment itself;
administration salaries.

Calculation of fixed costs:

FC = 50,000 * 12 + 48,000 + 84,000 + 500,000 = 1,232,000 rubles per year.

Let's calculate average fixed costs:

Variable costs include the cost of raw materials and materials, wages for workers in the sewing workshop and payment for utility costs.

VC = 200,000 + 360,000 + 18,500 * 12 = 782,000 rubles.

Average variable costs will be:

The sum of fixed and variable costs will give total costs:

TC = 1232000 + 782000 = 20,140,00 rubles.

Average total costs are calculated using the formula:

Results

The organization has just started sewing production: it rents a workshop and purchased sewing equipment on credit. The amount of fixed costs at the initial stage is significant. The fact that production volume is still low - 5,000 units - also plays a role. Therefore, fixed costs still prevail over variable ones.

As production volumes increase, fixed costs will remain unchanged, but variable costs will increase.

Analysis and planning

Cost planning allows an organization to use existing resources rationally and more efficiently, as well as to predict its activities for the future (applies to the short-term period). Analysis is also necessary in order to determine where the most expensive expense items are and how savings can be made on the production of goods.

Saving on fixed and variable costs reduces the cost of production - an organization can set a lower price for its products than before, which increases the competitiveness of products in the market and increases attractiveness in the eyes of consumers (

Costs You can call any expenditure of resources accountable. Those costs that are directly necessary for the production of a good or service are considered production costs.

The essence of costs is intuitively clear to almost everyone, but a significant part of the efforts of economic science is spent on their assessment, calculation and distribution. This happens because assessing the effectiveness of any process is a comparison of the amount of expenses incurred with the result obtained.

For economic theory, the study of costs means their determination and classification by type, origin, items and processes. Economic practice puts specific numbers into the formulas proposed by the theory and gets the desired result.

Concept and classification of costs

The simplest way to study costs is to add them up. The resulting amount can be subtracted from the revenue to determine the size, you can compare the amount of expenses for similar processes to determine a more economical option, etc.

To model economic situations, create formulas, evaluate business processes and their results, costs must be classified, i.e. divided according to certain characteristics and combined into typical groups. There is no rigid classification system; it is more convenient to consider costs based on the needs of a particular study. But some frequently used options can be considered a kind of rules.

Especially often costs are divided into:

Constant - independent of the volume of production in a specific period;
Variables - the size of which is directly tied to the amount of output.

Note that this division is valid only when considering a relatively short-term period. In the long run, all costs tend to become variable.

In relation to the main production process, it is customary to allocate costs:

For main production;
For auxiliary operations;
For non-production expenses, losses, etc.

If we imagine costs as economic elements, then we can distinguish from them:

Expenses for main production (raw materials, energy, etc.);
Labor costs;
Social contributions from wages;
Depreciation deductions;
Other expenses.

A more thorough, detailed way to find out the concept, composition and types of production costs would be to compile a cost estimate for the enterprise.

According to costing items, costs are divided into:

Purchased raw materials and supplies;
Semi-finished products, components, production services;
Energy;
Labor costs for key production personnel;
Tax deductions from wages in this category;
from the same salary;
Costs of preparation for production development;
Shop costs - a category of costs for operations associated with a specific production unit;
General production costs are expenses of a production nature that cannot be fully and accurately attributed to specific departments;
General expenses - expenses associated with the provision and maintenance of the entire organization: management, some support services;
Commercial (non-production) expenses - everything related to advertising, product promotion, after-sales service, maintaining the image of the enterprise and products, etc.

Another important type of cost, regardless of the analysis criteria, is average costs. This is the amount of costs per unit of output; to determine it, the volume of costs is divided by the number of units produced.

And the cost of each new unit of production when the volume of output changes is called marginal cost.

Knowing the size of average and marginal costs is necessary for making effective decisions about the optimal volume of output.

Methods for calculating costs

Formulas and graphs

A general idea of the cost classification system and the presence of expenses in certain areas does not provide practical results when assessing a specific situation. Moreover, even building models without exact numbers requires tools to illustrate the dependencies between certain elements of the cost system and their impact on the final result. Formulas and graphic images help to do this.

By putting the appropriate values into the formulas, it becomes possible to calculate a specific economic situation.

The number of costing formulas is difficult to determine precisely; each formula appears along with the situation it describes. An example of one of the most common would be the expression of total costs (calculated in the same way as total). There are several variations of this expression:

Total costs = fixed costs + variable costs;

Total costs = costs for main processes + costs for auxiliary operations + other costs;

In the same way, you can imagine the total costs determined by costing items; only the name and structure of the cost items will differ. With the right approach and calculation, applying different types of formulas to the same situation to calculate one value should give the same result.

To present the economic situation in graphical form, you should place points corresponding to the cost values on the coordinate grid. By connecting such points with a line, we get a graph of a certain type of cost.

This is how the graph can illustrate the dynamics of changes in marginal costs (MC), average total costs (ATC), average variable costs (AVC).

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It is impossible for companies to carry out any activity without investing costs in the process of making a profit.

However, there are different types of expenses. Some operations during the operation of the enterprise require constant investments.

But there are also costs that are not fixed costs, i.e. refer to variables. How do they affect the production and sale of finished products?

The concept of fixed and variable costs and their differences

The main goal of the enterprise is the manufacture and sale of manufactured products to make a profit.

To produce products or provide services, you must first purchase materials, tools, machines, hire people, etc. This requires the investment of various amounts of money, which are called “costs” in economics.

Since monetary investments in production processes come in many different types, they are classified depending on the purpose of using the expenses.

In economics costs are shared according to the following properties:

Explicit is a type of direct cash costs for making payments, commission payments to trading companies, payment for banking services, transportation costs, etc.;
Implicit, which includes the cost of using the resources of the organization's owners, not provided for by contractual obligations for explicit payment.
Fixed are investments to ensure stable costs in the production process.
Variables are special costs that can be easily adjusted without affecting operations depending on changes in production volumes.
Irreversible - a special option for spending movable assets invested in production without return. These types of expenses occur at the beginning of the release of new products or reorientation of the enterprise. Once spent, funds can no longer be used to invest in other business processes.
Average is the estimated cost that determines the amount of capital investment per unit of output. Based on this value, the unit price of the product is formed.
Marginal costs are the maximum amount of costs that cannot be increased due to the ineffectiveness of further investments in production.
Returns are the costs of delivering products to the buyer.

Of this list of costs, the most important are their fixed and variable types. Let's take a closer look at what they consist of.

Kinds

What should be classified as fixed and variable costs? There are some principles by which they differ from each other.

In economics characterize them as follows:

Fixed costs include the costs that need to be invested in the manufacture of products within one production cycle. For each enterprise they are individual, therefore they are taken into account by the organization independently based on an analysis of production processes. It should be noted that these costs will be characteristic and the same in each of the cycles during the manufacture of goods from the beginning to the sale of products.
variable costs that can change in each production cycle and are almost never repeated.

Fixed and variable costs make up the total costs, summed up after the end of one production cycle.

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What applies to them

The main characteristic of fixed costs is that they do not actually change over a period of time.

In this case, for an enterprise that decides to increase or decrease its output, such costs will remain unchanged.

Among them can be attributed the following cash costs:

communal payments;
building maintenance costs;
rent;
employee earnings, etc.

In this situation, you always need to understand that the constant amount of total costs invested in a certain period of time to produce products in one cycle will only be for the entire number of products produced. When calculating such costs individually, their value will decrease in direct proportion to the increase in production volumes. For all types of production this pattern is an established fact.

Variable costs depend on changes in the quantity or volume of products produced.

To them include the following expenses:

energy costs;
raw materials;
piecework wages.

These monetary investments are directly related to production volumes, and therefore change depending on the planned parameters of production.

Examples

In each production cycle there are cost amounts that do not change under any circumstances. But there are also costs that depend on production factors. Depending on such characteristics, economic costs for a certain, short period of time are called constant or variable.

For long-term planning, such characteristics are not relevant, because sooner or later all costs tend to change.

Fixed costs are costs that do not depend in the short term on how much the company produces. It is worth noting that they represent the costs of its constant factors of production, independent of the number of goods produced.

Depending on the type of production into fixed costs consumables include:

Any costs that are not related to production and are the same in the short term of the production cycle can be included in fixed costs. According to this definition, it can be stated that variable costs are those expenses invested directly in product output. Their value always depends on the volume of products or services produced.

Direct investment of assets depends on the planned quantity of production.

Based on this characteristic, to variable costs The following costs include:

raw material reserves;
payment of remuneration for the labor of workers involved in the manufacture of products;
delivery of raw materials and products;
energy resources;
tools and materials;
other direct costs of producing products or providing services.

The graphical representation of variable costs displays a wavy line that smoothly rises upward. Moreover, with an increase in production volumes, it first rises in proportion to the increase in the number of products produced, until it reaches point “A”.

Then cost savings occur during mass production, and therefore the line rushes upward at no less speed (section “A-B”). After the violation of the optimal expenditure of funds in variable costs after point “B”, the line again takes a more vertical position.
The growth of variable costs can be affected by the irrational use of funds for transport needs or excessive accumulation of raw materials and volumes of finished products during a decrease in consumer demand.

Calculation procedure

Let's give an example of calculating fixed and variable costs. The production is engaged in the manufacture of shoes. The annual production volume is 2000 pairs of boots.

The enterprise has the following types of expenses per calendar year:

Payment for renting the premises in the amount of 25,000 rubles.
Interest payment 11,000 rubles. for a loan.

Production costs goods:

for labor costs for the production of 1 pair 20 rubles.
for raw materials and materials 12 rubles.

It is necessary to determine the size of total, fixed and variable costs, as well as how much money is spent on making 1 pair of shoes.

As we can see from the example, only rent and interest on the loan can be considered fixed or fixed costs.

Due to fixed costs do not change their value when production volumes change, then they will amount to the following amount:

25000+11000=36000 rubles.

The cost of making 1 pair of shoes is considered a variable cost. For 1 pair of shoes total costs amount to the following:

20+12= 32 rubles.

Per year with the release of 2000 pairs variable costs in total are:

32x2000=64000 rubles.

Total costs are calculated as the sum of fixed and variable costs:

36000+64000=100000 rubles.

Let's define average of total costs, which the company spends on sewing one pair of boots:

100000/2000=50 rubles.

Cost analysis and planning

Each enterprise must calculate, analyze and plan costs for production activities.

Analyzing the amount of expenses, options for saving funds invested in production are considered for the purpose of their rational use. This allows the company to reduce production and, accordingly, set a cheaper price for finished products. Such actions, in turn, allow the company to successfully compete in the market and ensure constant growth.

Any enterprise should strive to save production costs and optimize all processes. The success of the development of the enterprise depends on this. Thanks to the reduction in costs, the company's income increases significantly, which makes it possible to successfully invest money in the development of production.

Costs are planned taking into account calculations of previous periods. Depending on the volume of products produced, they plan to increase or decrease variable costs for the manufacture of products.

Display in the balance sheet

In the financial statements, all information about the costs of the enterprise is entered into (Form No. 2).

Preliminary calculations during the preparation of indicators for entry can be divided into direct and indirect costs. If these values are shown separately, then we can assume that indirect costs will be indicators of fixed costs, and direct costs will be variable, respectively.

It is worth considering that the balance sheet does not contain data on costs, since it reflects only assets and liabilities, and not expenses and income.

To learn what fixed and variable costs are and what applies to them, see the following video:

4. Production costs. Types of costs

Organizational costs or expenses represent the amount of expenses that are simply necessary to ensure its functioning and carry out production and sales activities. Costs of business activity are an inevitable phenomenon; absolutely every company faces them. But at the same time, they are different for each individual and depend on the economic literacy of management and financial departments (accounting, marketing, etc.), which plan the volume of activity and the amount of costs.

Cost classification can be made using the following criteria.

1. Firstly, costs play a different role in shaping the cost of products, works, services; they are heterogeneous for each individual type of product or its range. Basic costs have a direct connection with the technological and production process through which a certain volume of goods and services for public and other consumption is produced. For example, these include the costs of procuring raw materials, supplies, fuel, and paying wages (salary + bonuses) to the organization’s employees. Overheads are associated with ensuring the production process and its organization, creating favorable working conditions. These are the so-called shop and general plant expenses.

2. According to the degree of homogeneity, costs are divided into simple, i.e. homogeneous, and complex. Simple ones are carried out in accordance with the specialization of the company, the direction of the enterprise’s activity and include all costs for the purchase and delivery of necessary factors of production to the warehouses of the enterprise and directly to production departments, as well as for payment for the “labor” factor. Complex costs– expenses of all production divisions and departments of the organization in their totality, for example, expenses of workshops, departments for carrying out activities in accordance with production purposes.

3. Based on the time of occurrence, all expenses of the organization can be identified as current, which are carried out directly in the present period, i.e. at the point in time when the process of production or other types of activities is actually taking place. This type of cost is the direct basis for further work planning. Future expenses are those expenses that the organization will incur in the future. For convenience, economic models of activity are compiled: based on the grouping of previously obtained data (i.e., analysis of all previous expenses), they present a forecast, thanks to which the organization can predict the structure of upcoming expenses and make certain decisions.

To make decisions about the organization of production, costs and distribution of resources and factors of production, it is necessary to take into account all potential opportunities, especially those that seem most acceptable from the point of view of benefit and profit. In addition, it is necessary to take into account the possibilities of more rational or alternative use of resources, which in general can help the company when planning its financial activities.

All costs can be classified in this way.

1. Accounting costs- these are all the company’s expenses in the current period for the purchase of raw materials, as well as fixed production assets and factors of production, among which one of the main places is labor.

2. Internal costs from an economic point of view, this is the amount of income that could be obtained as a result of more economical and rational consumption in the production process of all necessary material resources and factors of production.

3. Economic costs= accounting + internal.

4. Return costs- these are the company’s expenses, which sooner or later it returns back. As a rule, this happens at the end of one production cycle, or as a result of the company leaving the market and curtailing its activities. For example, costs associated with production itself: raw materials, factors, etc. As a result of the sale of goods and services, these costs will be fully covered (of course, if the production was properly constructed).

5. Sunk costs– these are one-time costs for creating a company or enterprise, its registration, insurance, etc. This type of costs cannot be used alternatively.

If we take the volume of output directly as the basis for the analysis, then for the short-term period we can distinguish two groups of costs:

1) fixed costs, which are in no way related to the production of goods and services. For example, rent, electric and gas utility bills, plus workers' salaries are regular monthly expenses;

2) variable costs are determined directly by the scale of production, i.e., the amount of products that were manufactured over a certain period of time. Initially, these costs are associated with the cost of purchasing raw materials, factors of production and other means of labor. The larger the scale of production, the more resources and factors of production are needed to carry out the production process. Fixed and variable costs in their totality are presented gross, i.e. they also include consumption of fixed capital - depreciation. If we take the firm's costs of producing one unit of output, on average we can calculate average costs. Limit They determine the cost of each additional unit of production according to the law of diminishing returns.

This text is an introductory fragment. From the book MBA in 10 days. The most important programs from the world's leading business schools author Silbiger Stephen

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