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ABC-costing (differentiated cost accounting method). ABC-Costing for practical use Direct material costs per unit of output

In the face of fierce competition, one of the main advantages of the company is the low cost of production. Errors in the calculation of the cost can lead to incorrect management decisions: the removal of profitable products from production or, conversely, an increase in the production of unpromising goods. The use of the ABC (Activity based costing) method allows the manager to more accurately determine the cost of a particular product, especially in a situation where indirect costs exceed direct ones.

Brief glossary of terms

Expenses- expenses of the enterprise, expressed in monetary form. All costs are accumulated by cost items and combined into cost groups.

Operations- actions performed to create or maintain cost objects (company management, purchase of goods, warehouse processing).

Resources- carriers of certain functions, that is, "what performs operations" and "those who perform operations" (production equipment, personnel).

Cost Object- any accounting unit (division, contract, distribution channel, product type, etc.), the costs of which are required to be determined separately.

Cost driver - a parameter proportional to which costs are transferred to the cost of resources. For example, rent (costs) is allocated to specific employees (resources) in proportion to the space they occupy (cost driver).

Resource Driver - parameter proportional to which the cost of the resource is transferred to the cost of the operation. For example, the cost of the work of storekeepers (resource cost) is distributed between the operations of receiving, storing, securing and shipping goods in proportion to the man hours required to perform these operations (resource driver).

Operation Driver - a parameter proportional to which the cost of operations is transferred to cost objects. For example, the cost of storing products (operation cost) is spread over the cost of products "A" and "B" (cost objects) in proportion to the volume of these products stored in the warehouse (resource driver).

Different approaches to calculating the cost of production

Direct and indirect costs

As a rule, there are no problems with direct costs in practice, since they can be directly attributed to the cost of a particular cost object.

Reference

The ABC method (Activity based costing) was developed by American scientists R. Cooper and R. Kaplan in the late 80s and is now widely used in the West. The name of this method is translated into Russian in different ways.The author of this article proposes to translate the name of the method as "Operation-oriented costing method".

The distribution of indirect costs is more difficult. Traditionally, they are transferred to cost objects in proportion to the size of labor costs, machine time, volume of production, sales, etc. If the share of indirect costs in the cost of manufactured products (works, services) is small, the traditional approach to cost is justified due to its simplicity and insignificant error result. However, in modern conditions, with the improvement of production technology, reducing its labor intensity and material consumption, as well as automating processes, the share of direct costs decreases, and the share of indirect costs (for general management, marketing, financial management, personnel management, etc.) increases. Moreover, in some sectors of the economy (for example, in trade, banking, insurance), the share of direct costs in total costs is traditionally small, so generally accepted approaches to the distribution of indirect costs can lead to incorrect management decisions. Products that consume the least resource that is proportional to indirect costs (eg labor) will appear more cost-effective in the calculations compared to products that consume more resources (eg high labor intensity). Using the ABC methodology for allocating indirect costs 1 avoids these errors.

Grouping costs, which will allow you to more accurately attribute them to the cost price

Personal experience
Evgeny Buyakin, Chief Financial Officer of Kaspersky Lab LLC (Moscow)

Our company sells software and additional services related to its use (consulting, technical support, training). Direct costs associated with the production and sale of software do not exceed 10% of the total costs. In this regard, the problem of distribution of indirect costs is very relevant for us. Due to the nature of our business, costing products using traditional methods can only be done with very large assumptions.

The main method of cost allocation that we use to analyze the profitability of operations is the ABC method. It allows you to manage production operations and evaluate their effectiveness, and also allows the company's management to see the real profit centers and, on this basis, adjust the investment policy.

Application of the ABC method in cost allocation

The ABC method is based on the fact that costs are generated as a result of performing certain operations. The process of calculating the cost of manufactured products (works, services) using ABC is shown in fig. 1 and assumes costing in three stages 2 .

On the first stage the cost of indirect costs in the enterprise is transferred to resources in proportion to the selected cost drivers. At the second stage, the structure of operations necessary to create products (works, services) is developed. After that, the cost of resources calculated in the previous step is transferred to operations in proportion to the selected resource drivers. At the third stage, the cost of operations is "absorbed" by cost objects in proportion to the drivers of operations. The result of this is the calculated cost of cost objects, such as products.

Reference

The ABC method described in the article was introduced at the end of 2002 in the Yaroslavl branch of the Dobrynya group of wholesale trading companies 3 . This branch has about 100 full-time employees, about 1500 items, serves about 700 customers and uses the services of about 50 suppliers. The author estimates that the total cost of implementing the method was approximately $1,000, since the implementation was done in-house using Excel.

Stage 1. Allocation of resource costs

In order to calculate the cost of resources, it is recommended, firstly, to determine the structure of resources, as well as the list of costs allocated to ensure the operation of each resource, and secondly, to distribute the costs of resources.

As a rule, the following types of resources are distinguished: personnel, equipment and transport, premises (land). Personnel is an essential resource. When determining its full cost, the salaries of employees, tax deductions from the wage fund, social benefits, depreciation of personal (office) equipment, costs of maintaining working conditions, transportation of employees to the place of work, training costs, etc. are taken into account.

Equipment and vehicles may not be included in the list of resources. If, in the performance of his functions, an employee always uses only this equipment, which is used only by him, then it is advisable to combine the cost of the “Equipment” resource with the cost of the “Employee” resource. For example, if a specific car is used by only one driver and this driver operates only this car all his working time, then it is advisable to combine the cost of the Driver resource with the cost of the Car resource.

The cost of the "Facilities" resource, as a rule, is transferred to the cost of the "Personnel" or "Equipment" resources, depending on who (what) this premises is constantly used for.

After the list of resources is compiled, it is necessary to allocate indirect costs to them. In most cases, costs are explicitly transferred to resources, for example, the amount of the salary of a commercial director is allocated to the resource "Commercial director". However, often one cost element can be transferred to several resources. For example, the rent of office space should be posted to the cost of the resource "Employees", whose workplaces are located in this room. Cost drivers are used to transfer costs to resources. First, the cost of a cost driver unit is determined (for a room - the cost of 1 sq. m), and then the amount of costs transferred to this resource is calculated based on the number of driver units consumed - the area of \u200b\u200bthe premises occupied by a particular employee.

Example 1 4
The assortment of the company "AVS-Torg" consists of two product groups:

Sausage products supplied by two manufacturers (meat processing plant and sausage factory);
- salted fish, also supplied by two producers (a fish processing plant and a fish factory).

The company has two distribution channels:

Trading warehouse (trade from which is self-delivery);
- delivery department (products are delivered directly to retail stores in the city).

The company rents two warehouses (for storing sausage and fish products) and an office. She owns:

Electric forklift;
- trucks for delivering goods to customers;
- computer and office equipment: PC, printers, copiers;
- storage refrigeration equipment.

An analytical breakdown of the costs (not including the cost of purchased goods) of the ABC-Torg company for the month is given in Table. one.

Table 1. Costs of the company "AVS-Torg" per month

Cost Group/Line Item	Amount, thousand rubles	Cost Group/Line Item	Amount, thousand rubles
Salary and social benefits	301	Settlement Accountant	9
CEO	30	Accountant for other accounts	1
Commercial Director	20	Head of a trading warehouse	5
	15	Head of the household	3
	13	Sales Manager	3
Chief Accountant	18	Sales Representatives	9
Settlement Accountant	10	Purchasing manager	4
Accountant for other accounts	10	Depreciation and repair of fixed assets	87
Head of a trading warehouse	15	Personal office equipment and furniture	36
storekeepers	25	- CEO	5
Operationists	14	- Commercial Director	4
Store manager	12	- information technology specialist	3
movers	25	- HR specialist	2
Head of the household	12	- Chief Accountant	2
Sales Manager	15	- accounting accountant	2
Sales Representatives	30	- accountant for other accounts	2
Forwarding drivers	20	- warehouse manager	3
Purchasing manager	10	- tellers	6
Purchasing Forwarder	7	- store manager	1
Fare	213	- Head of the household	2
Hiring transport for the purchase of goods	110	- Sales Manager	2
Fuel and lubricants for transport (for the delivery of goods to customers)	70	- purchasing manager	2
General transport	33	Office equipment for general use (printers-copiers)	8
- CEO's car	10	Transport for delivery of goods to customers	10
- commercial director's car	13	Warehouse equipment (scales, loader)	15
- manager's car	10	Hopodilny equipment of a warehouse of sausages	10
Operating expenses for office equipment	80	Refrigeration equipment of the fish warehouse	8
Telephone communications	68	Rent	85
CEO	10	Office	40
Commercial Director	8	Sausage warehouse	20
Information technology specialist	1	Warehouse of fish products	25
Human Resources Specialist	1
Chief Accountant	2	Total	882

Let's calculate for "AVS-Torg" the cost of goods for the cost objects "Suppliers" (meat processing plant, sausage factory, fish factory, fish processing plant) and "Distribution channels" (self-delivery, delivery).

Suppose all the costs of the company "AVS-Torg" in the amount of 822 thousand rubles. for the selected cost objects are indirect. The company has no balances of finished products, materials, semi-finished products and work in progress at the beginning and at the end of the month.

Let's group the costs from the table. 1 by type of resources.

Some types of resources in an enterprise are combined into a single resource. For example, the running costs of personal equipment are combined with the cost of human resources; motor transport - with forwarding drivers; personal computers - with employees using them; electric forklift - with loaders, etc.

Table 2. Example of allocation of resource costs


Resource "Drivers-explorers"
Wage	20
Fuel and lubricants by transport to deliver goods to customers	70
Transport depreciation	10
Total resource cost	100
Resource "Commercial director"
Wage	20
Fare	13
Operation of office equipment	2,41
Telephone communications	8
Depreciation of office equipment and furniture	4
Depreciation of office equipment for general use	0,24
Office rent	5,36
Total resource cost	53,01

The cost of each resource is determined by transferring to it the costs aimed at ensuring the activity of this resource. For example, the rent for an office attributable to the resource "Commercial Director" (see Table 2) is determined based on the ratio of the total office area and the part of it that is used by the commercial director, and is based on the following data:

office rent - 40 thousand rubles;
cost driver - occupied area;
office space - 112 sq. m;
cost of 1 sq. m of office space - 0.357 thousand rubles. (40:112);
area occupied by the commercial director - 15 sq. m.

Accordingly, we attributed 5.36 thousand rubles to the resource "Commercial Director" under the cost item "Rent". (0.357 x 15).

By distributing costs, the cost of all enterprise resources is determined (see Table 3).

Table 3. The cost of the resources of the company "AVS-Torg*

The code*	Resource type/Resource	Cost, thousand ru6.
	Staff	744,00
R1	CEO	63,39
R2	Commercial Director	53,01
R3	Information technology specialist	28,80
R4	Human Resources Specialist	22,44
R6	Chief Accountant	34,62
P6	Settlement Accountant	38,70
R7	Accountant for other accounts	21,12
R8	Head of a trading warehouse	25,69
R0	storekeepers	25,00
RI0	Operationists	50,51
R11	Store manager	13,00
R12	movers	25,00
R13	Head of the household	29,14
R14	Sales Manager	28,25
R15	Sales Representatives	39,00
R16	Forwarding drivers	100,00
R17	Purchasing manager	29,3
R18	Purchasing Forwarder	117,00
	Equipment and facilities	78,00
R19	General storage equipment	15,00
R20	Sausage warehouse	30,00
R2I	Warehouse of fish products	33,00
		822,00
*The use of codes is due to the need for a brief description of accounting objects. The resource code is formed from the letter "R" and its ordinal number. The operation code is defined in the same way. - Note. editions.

Stage 2. Transferring the cost of resources to operations

As already noted, the cost of resources is transferred to operations in proportion to resource drivers. The most commonly used drivers are working hours (for personnel), machine time (for equipment), etc. Having determined the cost of using a resource driver unit (the cost of one hour of work of an employee, equipment) and the number of driver units consumed by each operation, we can calculate the cost of a given resource that is transferred to a specific operation.

Direct and indirect costs

The classification of costs as direct or indirect depends on what is considered as a cost object. For example, in customer costing, cost objects can be distribution channel, customer group, customer, order. And when calculating costs for manufactured products, the following cost objects are possible: product group, product, batch of goods, unit of production.

Thus, when calculating the cost of a unit of production of a certain product, the salary costs of a purchasing manager will be recognized as indirect, since the manager is also purchasing other goods of the same product group. At the same time, the salary of the same manager for the Product Group cost object will be treated as a direct cost.

However, other approaches are also possible. According to the financial director of Kaspersky Lab LLC Evgenia Buyakina, his company does not allocate resources proportionally to drivers, but keeps a record of their actual use in various operations.

Example 2
The two-level operating structure and the cost of each operation of the company "AVS-Torg" are given in Table. four.

An example of the distribution of the cost of the resource "Commercial Director" for operations is shown in Table. 5. In this case, the resource driver is the commercial director's weekly fund of working time - 40 hours. The driver unit cost is determined by dividing the resource cost calculated in the previous step by the total number of driver units (working time fund).

To find out how much time (driver units) a particular employee spends on a particular operation, various methods are used: timekeeping, a photo of the working day, surveys, etc.

It should be noted that the operation can be performed by more than one employee, that is, the cost of several resources will be transferred to it. Thus, the operation "Management of warehouse processing" is performed by the commercial director and the head of the trading warehouse, therefore it has two resources - sources that transfer part of their value (11.93 and 22.47 thousand rubles, respectively) to the named operation.

Table 4. The structure of operations of the company "AVS-Torg"

	Operation group / Operations	Expenses, thous. rub.
O1	Company management	238,21
O11	General management	63,39
O12	Accounting	94,44
013	Personnel Management	22,44
O14	Provision of information technologies	28,80
O15	Supply of goods and materials and carrying out household work	29,14
O2	Purchase of goods	164,12
O21	Managing the processes of purchasing goods	21,46
022	Formation of the order and sending to the supplier	25,66
O23	Delivery of goods	117,00
O3	Warehouse processing	212,91
O31	Warehouse processing management	34,40
O32	Acceptance of goods	37,30
O33		39,89
O34		40,61
O35	Shipment of goods	60,71
O4	Sale of tools	206,76
O41	Goods sales management	26,51
042		13,00
013	Sold to delivery customers	167,25
Total		822,00

Table 5. An example of the distribution of the cost of the resource "Commercial Director" by operation

However, later the cost of not all operations can be distributed among the cost objects. Further distribution of operations depends on their type. Within the framework of the ABC method, all transactions are classified as follows:

main- operations that directly create cost objects (usually supply, production, marketing); their cost can be directly attributed to cost objects;
serving- operations that create conditions for the normal functioning of resources of a certain type (providing information technology, personnel management, etc.); their cost is transferred to the resources they serve;
managers- operations that manage both main and service operations; their cost is transferred to all operations of the control area. For example, the cost of the Operation Shop Floor operation is transferred to the cost of all operations performed by the shop floor.

Thus, the distribution scheme for indirect costs according to the ABC method is somewhat more complicated (see Fig. 2).

Before proceeding to the third stage - the distribution of the cost of operations to cost objects - you need to post the cost of servicing and managing operations. At the same time, in practice, cyclic dependencies almost always occur, that is, situations where the cost of several operations is transferred to each other. A similar situation may arise in the distribution chain "Operations - resources".

Example 3
The list of the main operations of the company "AVS-Torg" is given in Table. 6, a list of attendants - in table. 7, managerial - in table. eight.

In AVS-Torg, the servicing operation "Provision of information technologies" will be allocated to the resource "HR Specialist" (since this specialist uses a personal computer, network, Internet). The cost of this resource is transferred to the "Personnel Management" operation, which in turn is distributed, among other things, to the "Information Technology Specialist" resource that performs the original "Information Technology Provision" operation. Thus, cyclic dependencies 5 arise (see Fig. 3).

Table 6. Main operations of "AVS-torg"

The code	Basic operations
O12	Accounting*
O22	Forming an order and sending it to the supplier
O23	Delivery of goods
O32	Acceptance of goods
O33	Storage and preservation (sausages)
O34	Storage and preservation (fish products)
O35	Shipment of goods
O42	Sale of warehouse to customers
O43	Sales to customers of the delivery department
*Often considered as a maintenance function. However, in order for the cost of this operation to be directly distributed to cost objects, it is necessary to single out an indicator that characterizes the need for this function - the intensity of the workflow (number of documents) associated with a particular cost object. This indicator can be the driver of this operation.

Table 7. Servicing operations "AVS-torg"

Table 8. Management operations "AVS-torg"

To determine the total cost of operations and resources, taking into account the cyclic relationship, you need to solve a system of linear equations (see help).

By solving the system, you can determine the total cost of all resources and operations. After that, the sum of the costs of the main operations should be equal to the total costs of the enterprise, that is, all costs will be distributed among the main operations.

Example 4
For the company "AVS-Torg" a system of 37 equations was solved. The results of the solution are given in table. 9.

As a result, the total cost of the main operations will be equal to the sum of all the costs of the enterprise:

O12 + O22 + O23 + O32 + O33 +O34 + O35 +O42 + + O43 = 822 thousand rubles

Table 9. Total cost of operations and resources of the company "AVS-Torg"

Resource Code	Price resources, thousand rubles	Operation code	Price operations, thousand rubles
R1	71,29	O11	71,29
R2	60,25	O12	124,48
R3	35,37	O13	30,20
R4	29,01	O14	45,56
R5	41,86	O15	41,58
R6	45,01	O21	35,24
R7	27,48	O22	40,03
R8	32,00	O23	136,07
R9	29,23	O31	51,74
R10	62,60	O32	57,84
R11	15,25	O33	65,16
R12	31,78	O34	64,96
R13	31,30	O35	86,36
R14	34,82	O41	4031
R1S	43,36	O42	35,41
R16	104,36	O43	202,60
R17	35,90
R18	118,45
R10	15,40
R20	40,69
R21	42,96

Stage 3. Allocation of the cost of the main operations to cost objects

At the last stage, the cost of the main operations is allocated to the cost objects. By analogy with the previous stages, this distribution is carried out in proportion to the drivers. The quantitative characteristics of the cost objects themselves act as drivers of operations, for example, sales volume or production volume in monetary or physical terms.

Example 5
Examples of the distribution of the cost of the main operations on the cost objects of the company "ABC-Torg" are given in table. ten.

Table 10. Distribution of the cost of operations by cost objects in the company "AVS-Torg"

032. Operation "Acceptance of Goods" - 57.84 thousand rubles.
Cost object "Supplier"	Driver unit, tonnage	Amount, thousand rubles
meat processing plant	212	15,86
sausage factory	47	3,52
	416	31,13
fish factory	98	7,33
022. Operation "Formation of an order and sending to the supplier" - 49.03 thousand rubles.
Cost object "Supplier"	Unit of driver, number of orders	Amount, thousand rubles
meat processing plant	16	0,64
sausage factory	4	5,16
Fish processing plant	8	10,32
fish factory	10	12,90
042. Operation "Sale of a trading warehouse to customers" - 35.40 thousand rubles.
Cost object "Distribution channel"	Driver unit	Amount, thousand rubles
Pickup	-*	35,40
*The operation "Sale to customers of a trading warehouse" refers to only one cost object, so its cost is transferred to this cost object directly without the use of drivers. - Note. editions.

As already noted, cost objects can be different, since each company chooses them independently based on its goals. In practice, the most common cost objects are "Customers" and "Products".

Reference
System of equations for determining the total cost of operations and resources

where n is the number of operations;

m is the amount of resources;

O i - total cost of the i-th operation;

R i - total cost of the i-th resource;

C m is the cost of resource m, obtained at the first stage (that is, C1 = R1 from Table 6);

a i,n - share of the cost of the i-th resource, which is transferred to the cost of operation n;

b i,n - share of the cost of the i-th operation, which is transferred to the cost of operation n;

d i,m - share of the cost of the i-th operation, which is transferred to the cost of resource m.

The only unknowns in the system of equations are O i and R i . Thus, we have a system of (n + m)-equations with respect to (n+m)-unknowns. You can solve it using any software that can solve systems of linear equations, including Excel 6.

Personal experience
Evgeny Buyakin

Our main cost objects are customers or homogeneous groups of customers. Therefore, when allocating the cost of operations between cost objects, the most interesting for analysis are data on customers (both direct buyers and distributors of our products), as well as a significant indicator of profitability - the profitability of the client, not the product.

Table 11. Sales structure of ABC-Torg, thousand rubles

Table 12. The structure of income "ABC-Torg", thousand rubles.

Example 6
We use the monthly sales data of AVS-Torg (see Table 11) and income information (see Table 12) in our calculations. In this example, the trade margin is considered as income.

After allocating the cost of the main operations to cost objects (“Suppliers” and “Distribution channels”) and calculating the full cost for each of the two types of cost objects, and combining this data with revenue information, we will get a cost analysis in the context of “Distribution channels - suppliers ”(Table 13) and “Suppliers - distribution channels” (Table 14).

According to these tables, the management of the AVS-Torg holding can determine that the products of the meat processing plant bring the greatest profit (especially when sold through the Samovyvoz distribution channel), and the products of the fish processing plant are unprofitable in any distribution channel.

In addition, the lower profitability of the "Delivery" distribution channel is obvious in comparison with the "Pickup" distribution channel. It makes sense for the management of AVS-Torg to think about increasing the price of delivery or increasing the share of sales of products through self-delivery.

Table 13. Results of the ABC method in the context of "Distribution channels - suppliers"

Distribution channels - suppliers		Product costs, thousand rubles	Total expenses	Sales, thousand rubles	Mark-up, thousand rubles	Profit, thousand rubles	Return on sales, %
Pickup	125,36	233,81	359,17	6700,00	582,00	222,83	3,33
meat processing plant	56,13	76,02	132,15	3000,00	300,00	167,85	5,60
sausage factory	18,71	21,33	40,04	1000,00	87,00	46,96	4,70
Fish processing plant	37,42	91,62	129,04	2000,00	120,00	–9,04	-0,45
fish factory	13,10	44,84	57,94	700,00	75,00	17,06	2,44
Delivery	275,83	186,97	462,8	5240,00	530,00	67,22	1,28
meat processing plant	105,28	50,68	155,96	2000,00	230,00	74,04	3,70
sausage factory	31,38	12,80	44,38	600,00	50,00	5,62	0,94
Fish processing plant	131,60	114,52	246,12	2500,00	230,00	–16,12	–0,64
fish factory	7,37	8,97	16,34	140,00	20,00	3,66	2,61
Total	401,10	420,76	821,07	11040,00	1112,00	200,03	2,43

Table 14. The results of the ABC method in the context of "" Suppliers - distribution channels -

Suppliers - distribution channels	Product costs, thousand rubles	Distribution channel expenses, thousand rubles	Total expenses	Sales, thousand rubles	Mark-up, thousand rubles	Profit, thousand rubles	Return on sales, %
meat processing plant	126,70	161,41	288,11	5000,00	530,00	241,89	4,84
Pickup	76,02	56,13	132,15	3000,00	300,00	167,85	5,60
Delivery	50,68	105,28	155,96	2000,00	230,00	74,04	3,70
sausage factory	34,13	50,29	84,42	1600,00	137,00	52,58	3,29
Pickup	21,33	18,71	40,04	1000,00	87,00	46,96	4,70
Delivery	12,80	31,58	44,38	600,00	50,00	5,62	0,94
Fish processing plant	206,14	169,02	375,16	4500,00	350,00	–25,16	-0,56
Pickup	91,62	37,42	129,04	2000,00	120,00	–9.04	–0,45
Delivery	114,52	131,60	246,12	2500,00	230,00	–16,12	–0,64
fish factory	53,81	20,47	74,28	840,00	95,00	20,72	2,47
Pickup	44,84	13,10	57,94	700,00	75,00	17,06	2,44
Delivery	8,97	7,37	16,34	140,00	20,00	3,66	2,61
Total	420,78	401,19	621,07	11040,00	1112,00	200,03	2,43

Results of applying the ABC method

As already noted, ABC allows an enterprise to determine the cost and productivity of operations with a high degree of certainty, evaluate the efficiency of resource use and calculate the cost of products (works, services). Often the data obtained by this method differ radically from the results of traditional calculation methods.

Example 7
If we allocate all the expenses of AVS-Torg (822 thousand rubles) to cost objects in the traditional way, for example, in proportion to sales volume, then we will get the following results (see Table 15).

Now the products of the fish processing plant look profitable due to the high profitability when sold through the Delivery channel. The distribution of costs in accordance with the volume of sales hid the unprofitability of these products.

The profitability of the products of the fish factory in this case is almost doubled (from 2.47 to 4.43%), and the sausage factory, on the contrary, is underestimated by the same amount (from 2.47 to 1.68%).

Table 15. Calculation of profitability of sales, taking into account the distribution of costs by the traditional method

Cost Object	Expenses, thousand roubles.	Sales, thousand roubles.	markup, thousand roubles.	Profit, thousand roubles.	Profitability, %
Distribution channels - suppliers
Pickup	461,25	6700	582	120,75	1,80
meat processing plant	206,53	3000	300	93,47	3,12
sausage factory	68,84	1000	87	18,16	1,82
Fish processing plant	137,09	2000	120	-17,69	-0,88
fish factory	46,19	700	75	26,81	3,83
Delivery	360,75	5240	530	169.25	3,23
meat processing plant	137,68	2000	230	92,31	4,62
sausage factory	41,31	600	50	8,09	1,45
Fish processing plant	172,11	2500	230	57,89	2,32
fish factory	9,64	140	20	10,36	7,40
Total	822,00	11940,00	1112,00	290,00	2,43
Suppliers - distribution channels
meat processing plant	344,22	5000,00	530,00	185,78	3,72
Pickup	206,53	3000,00	300,00	93,47	3,12
Delivery	137,60	2000,00	230,00	92,31	4,62
sausage factory	110,15	1600,00	137,00	26,85	1,68
Pickup	68,84	1000,00	87,00	18,16	1,82
Delivery	41,31	600,00	50,00	8,69	1,45
Fish processing plant	309,90	4500,00	360,00	40,20	0,89
Pickup	137,69	2000,00	120,00	–17,69	–0,88
Delivery	172,11	2500,00	230,00	57,89	2,32
fish factory	57,83	840,00	95,00	37,17	4,43
Pickup	48,19	700,00	75,00	26,81	3,83
Delivery	9,64	140,00	20,00	10,36	7,40
Total	822,00	11940,00	1112,00	290,00	2,43

Based on data on the real cost of manufactured products, the enterprise will be able to make decisions about changing the product range, reducing prices and eliminating the distribution channel.

Thus, the application of the ABC method allows you to make informed decisions regarding:

cost reduction. The real picture of costs makes it possible to more accurately determine the types of costs that need to be optimized;
pricing policy. The exact allocation of costs to the objects of calculation allows you to determine the lower limit of prices, a further decrease in which relative to such a limit leads to unprofitability of the product;
commodity-assortment policy. The real cost allows you to develop a program of action in relation to a particular product - to withdraw from production, optimize costs or maintain at the current level;
evaluation of the cost of operations. You can decide whether it makes sense to outsource certain operations or whether organizational changes are necessary.

However, it is worth mentioning the problems that may arise when implementing the ABC method. First of all, this is a high labor intensity and significant costs for the implementation of the method at the enterprise. These indicators are interrelated: as a rule, while minimizing the costs of implementation, the complexity of the process increases, and vice versa. In addition, some time will be required: in large companies, the implementation of the ABC method can take about a year, in small companies with relatively simple processes, implementation can be much faster. Thus, in Dobrynya, the description of the structure of operations and resources took one week, and the quantitative assessment of drivers took about a month.

Thus, only with a balanced assessment of both the benefits of using the method and the problems that the company may face, the CFO and manager can decide whether it is advisable to use the ABC method in the company at the present time.

The preparation of the article was supervised by a member of the Expert Council, General Director of MCT Lab Sergey Muratov

“As a result of applying the ABC method, it is possible to identify 30-40% of the costs that can be avoided”

Interview with the General Director of VIP Anatekh (Moscow), Ph.D. tech. Sciences Vladimir Ivlev

- In your opinion, what is the reason for the interest of Russian enterprises in the application of the ABC method?

The fact is that business process modeling allows you to make the processes that exist in the enterprise transparent to the company's management, and the ABC method allows management to approach management issues in terms of cost, quality and productivity of the actions performed, as well as assess the risks associated with them. . Based on such information, top management is able to make informed management decisions, both strategic and operational. For example, decisions related to the development of new products / services and markets, optimization of the organizational structure and assortment policy of the enterprise, etc.

Reference
Consulting company "VIP Anatekh" has been on the market since 1996. In addition to business and IT consulting services, the company develops software for business management, as well as trains enterprises in modern methods of modeling and analyzing complex systems and business processes 7 .

In addition, after the introduction of the ABC method at the enterprise, it is possible to quickly and cost-effectively implement an operation-oriented budgeting system (Activity based budgeting, ABB). If the determination of the cost of business processes and the cost of manufactured products (services) using the ABC method is a movement along the chain "resources - operations - cost object", then ABB is a movement along the same chain, only in the opposite direction.

- Why is ABC still not widely used in Russian enterprises?

This is due to the fact that despite the simplicity of the main idea of this method - "to manage not costs, but actions", - it is not so easy to implement. Even the first stage of setting the ABC method - a detailed description of business processes (operations) - in practice is a rather complex and time-consuming task. In addition, many business leaders have a poor idea of the essence and advantages of this method, and without the initiative of the management, as you know, there can be no talk of any implementation.

- What problems do you face when setting up the ABC method?

Firstly, the staff is not interested in determining the cost of their operations and their workload.

Secondly, enterprises most often do not have competent and up-to-date descriptions (models) of business processes that serve as the basis for applying the ABC method. We involve experienced experts in their creation - as a rule, these are process owners 8 . When calculating the cost of described (simulated) business processes, usually 30-40% of all processes have to be revised: when employees realize that the cost of their work is being calculated, they radically change their view of their activities. In such a situation, they tend to ascribe additional functions to themselves. As a result, when an employee's employment data is summarized, their working day may exceed 24 hours.

Thirdly, difficulties arise at the stage of distribution of costs by categories and responsibility centers. Often, at the enterprise where we are running the next project, there is no well-functioning management accounting system, so it is often simply impossible to obtain cost data for the required sections of activity. We have to build this system first.

- Which enterprises are currently most actively implementing the ABC method?

This method is used by enterprises that are focused on creating strategic competitive advantages. If the manager of the enterprise wants to understand, how resources are actually used and how to effectively manage these resources, sooner or later he will come to understand the need to implement ABC in his enterprise.

- What are the results of applying the ABC method in enterprises?

Usually, as a result of the implementation of this method, it is possible to identify 30-40% of the costs in the total amount of costs that can be avoided. This allows you to get additional profit.

- What do you think is the future of the ABC method in Russia?

I think that since this method does not only achieve significant cost savings in the enterprise, but also determines the right strategic path, it is very promising and will be used more widely over time.

Interviewed by Alexander Afanasiev

__________________________________________
1 If the enterprise is faced with the task of not only calculating the cost of cost objects, but also determining the cost of each operation, in order to then consider the possibility of outsourcing a number of service operations, then the ABC method should be applied to both direct and indirect costs.
2 Most of the authors describing the ABC method consider a two-stage cost distribution model as the basic one. At the first stage, all costs are allocated to operations, and at the second stage, the cost of operations is attributed to cost objects. According to the author, the introduction of an additional link "Resources" reduces the complexity of the calculations. The three-stage Activity based costing method is implemented in some software products, for example, in Cost Control 4.4.0 by QPR Software.
3 The presented approach is the result of a synthesis of ABC methods proposed and described by various experts (see the list of references on our website www.
4 Since the description of a real operating company is excessively laborious, overloaded with information and cannot be presented within the framework of the journal, the author considers the ABC methodology using the example of the conditional company "AVS-Torg".
5 For more information about the problem of cyclic dependencies in the distribution of costs and resources, see the textbook by K. Drury "Management and production accounting". M.: Unity-Dana, 2002. - Note. editions.
6 In MS Excel, linear equations can be solved using the "Search for a solution" command in the "Tools" menu. As a rule, this command is not installed in the standard version of MS Excel, but you can do it yourself: go to the "Settings" submenu of the "Tools" menu and check the box next to the "Search for a solution" command. - Note. editions.
7 For a list of consulting companies involved in the implementation of the ABC method, see . - Note. editions.
8 Read more about who can be the owner of the process, as well as about the description and optimization of business processes, read in an interview with A. Shmataluk. - Note. editions.

Activity based costing (“accounting by type of activity” or “calculation of costs based on business processes”) - calculation of cost by volume of economic activity.

Activity Based Costing or ABC Method , widely used in European and American enterprises of various profiles.

In the literal sense, this method means "accounting for costs by work", i.e. functional cost accounting.

In Activity Based Costing, an enterprise is viewed as a set of work activities. The initial stage of applying ABC is to determine the list and sequence of work in the enterprise, which is usually carried out by decomposing complex work operations into their simplest components, in parallel with the calculation of their resource consumption. Within the framework of the ABC, three types of work are distinguished according to the way they participate in the production of products: Unit Level (piece work), Batch Level (batch work) and Product Level (product work). Such (work) in ABC systems is based on the experimental observation of the relationship between the behavior of costs and various production events: the release of a unit of production, the release of an order (package), the production of a product as such. At the same time, another important category of costs is omitted, which does not depend on production events - costs that ensure the functioning of the enterprise as a whole. To account for such costs, a fourth type of work is introduced - Facility Level (general business work). The first three categories of work, or rather, the costs of them, can be directly attributed to a specific product. The results of general economic work cannot be accurately assigned to one or another product, therefore, various algorithms have to be proposed for their distribution.

Accordingly, in order to achieve an optimal analysis, resources are also classified in the ABC: they are divided into those supplied at the time of consumption and supplied in advance. The former include piecework wages: workers are paid for the number of work operations that they have already completed; the second - a fixed salary, which is negotiated in advance and is not tied to a specific number of tasks. This division of resources makes it possible to organize a simple system for periodic reports on costs and income, solving both financial and managerial tasks.

All resources spent on a work operation constitute its cost. At the end of the first stage of the analysis, all the work of the enterprise must be accurately correlated with the resources necessary for their implementation. In some cases, the cost item clearly corresponds to some kind of work.

However, a simple calculation of the cost of certain works is not enough to calculate the cost of the final product. According to ABC, the work operation must have an index-measurement of the output result - the cost driver. For example, the cost driver for the “Supply” cost item will be “Number of purchases.

The second stage of application of the ABC is to calculate the cost drivers and indicators of their consumption of each resource. This consumption figure is multiplied by the cost per unit output of the work. As a result, we get the amount of consumption of a particular work by a particular product. The sum of consumption by a product of all works is its cost price. These calculations constitute the 3rd stage of the practical application of the ABC methodology.

I note that the presentation of an enterprise as a set of work operations opens up wide opportunities for improving its functioning, allowing for a qualitative assessment of activities in such areas as investment, personal accounting, personnel management, etc.

Corporate strategy implies a set of goals that an organization wants to achieve. The goals of the organization are achieved by the performance of its work. Building a work model, determining their relationships and execution conditions provide a reconfiguration of the business process of the enterprise to implement the corporate strategy. ABC, ultimately, increases the competitiveness of the enterprise, providing accessible and operational information to managers at all levels of the organization.

An even greater effect in cost optimization can be achieved by using ABC in combination with another technique, namely - the concept of life cycle costing (Life Cycle Costing - LCC).

This approach was first applied in the framework of government projects in the defense industry. The cost of the entire life cycle of a product, from design to retirement, was the most important indicator for government agencies, since the project was funded based on the full cost of the contract or program, and not on the cost of a particular product. New production technologies have provoked the transfer of LCC methods to the private sector. There are three main reasons for this transition: a sharp reduction in the life cycle of products; increase in the cost of preparation and launch into production; almost complete definition of financial indicators (costs and incomes) at the design stage.

Technological advances have shortened the life cycle of many products. For example, in computer technology, the time of production of products has become comparable to the time of development. The high technical complexity of the product leads to the fact that up to 90% of production costs are determined precisely at the R&D stage. The most important principle of the concept of life cycle costing (LCC), thus, can be defined as "forecasting and managing the costs of manufacturing a product at the design stage".

Successful work in the conditions of global competition requires not only constant updating of the range and quality of products, but also a thorough analysis of the enterprise's activities to reduce unnecessary or duplicated functions (works). Often, an organization, in pursuit of cost reduction goals, adopts a policy of total cost reduction. Such a solution is the worst, since under such a policy, all work is subject to reduction, regardless of its usefulness. A general reduction can reduce the performance of essential work, which will lead to a deterioration in the overall quality and productivity of the enterprise. The drop in productivity, in turn, will lead to another wave of layoffs, which will once again reduce the efficiency of the organization. Attempts to get out of this vicious circle will force the company to raise costs above the initial level.

The ABC methodology allows the enterprise not only to reduce costs line by line, but to identify excess resource consumption and redistribute them in order to increase productivity.

Thus, this method has a number of advantages:

1. It allows you to analyze overheads in detail, which is of great importance for management accounting.

2. The ABC method makes it possible to more accurately determine the cost of unused capacity for periodic write-off to the profit and loss account. The unit cost estimated using this method is the best financial estimate of the resources consumed, as it takes into account complex alternative ways of determining the relationship between production and resource use.

3. The ABC method allows you to indirectly assess the level of labor productivity: a deviation from the amount of resources consumed, and therefore from the release or comparison of the actual level of cost sharing with the volume that could be possible with real resource provision.

4. The ABC method not only delivers new information about costs, but also generates a number of non-financial indicators, mainly measuring the volume of production and determining the production capacity of the enterprise.

Based on the foregoing, we note that introduction of the ABC system into the practice of Russian enterprises would provide a reliable calculation of the cost of specific products, which will significantly increase the objectivity of assessing the profitability of products. Ultimately, the use of ABC will increase the competitiveness of the enterprise, since it provides access to operational information at all levels.

Activity Based Costing or ABC Method, widely used in European and American enterprises of various profiles.

In the literal sense, this method means "accounting for costs by work", i.e. functional cost accounting.

In Activity Based Costing, an enterprise is viewed as a set of work activities. The initial stage of applying ABC is to determine the list and sequence of work in the enterprise, which is usually carried out by decomposing complex work operations into their simplest components, in parallel with the calculation of their resource consumption. Within the framework of the ABC, three types of work are distinguished according to the way they participate in the production of products: Unit Level (piece work), Batch Level (batch work) and Product Level (product work). Such a classification of costs (works) in ABC systems is based on the experimental observation of the relationship between the behavior of costs and various production events: the release of a unit of production, the release of an order (package), the production of a product as such. At the same time, another important category of costs is omitted, which does not depend on production events - costs that ensure the functioning of the enterprise as a whole. To account for such costs, a fourth type of work is introduced - Facility Level (general business work). The first three categories of work, or rather, the costs of them, can be directly attributed to a specific product. The results of general economic work cannot be accurately assigned to one or another product, therefore, various algorithms have to be proposed for their distribution.

An even greater effect in cost optimization can be achieved by using ABC in combination with another technique, namely - concept of life cycle cost accounting (life cyclecosting-LCC).

The ABC methodology allows the enterprise not only to reduce costs line by line, but to identify excess resource consumption and redistribute them in order to increase productivity.

Thus, this method has a number of advantages:

It allows you to analyze overheads in detail, which is of great importance for management accounting.

The ABC method makes it possible to more accurately determine the cost of unused capacity for periodic write-off to the profit and loss account. The unit cost estimated using this method is the best financial estimate of the resources consumed, as it takes into account complex alternative ways of determining the relationship between production and resource use.

The ABC method allows you to indirectly assess the level of labor productivity: a deviation from the amount of resources consumed, and therefore from the release or comparison of the actual level of cost sharing with the volume that could be possible with real resource provision.

The ABC method not only delivers new information about costs, but also generates a number of non-financial indicators, mainly measuring the volume of production and determining the production capacity of the enterprise.

“No one should believe in anyone like the Lord God or his prophet.
It’s enough just to listen to a person who makes you think.”
Peter Oppenheimer, English economist

Janus - the two-faced god in Roman mythology - was considered the patron of doors, entrances and exits, as well as all beginnings in time. It was he who, before the advent of the cult of Jupiter, was the deity of the sky and sunlight, opened the heavenly gates in the morning, releasing the sun into heaven, and closed them at night. The Romans believed that Janus taught people chronology, crafts and agriculture. It is known that one face of Janus was young and the other old. He was both good and bad at the same time. But let's move from Roman mythology to finance and management accounting.

In management accounting, there are two costing concepts: the absorption costing method and the variable costing method, which, like the two-faced Janus, do not allow unambiguous treatment of cost and pricing issues. ABC costing (Activity Based Costing) has the greatest duality in management accounting, since it can be designed both on the principle of greater absorption of costs, and on a method that will be closer to the calculation of variable costs. In such a situation, the question arises: is functional cost accounting a tribute to fashion or time?

ABC costing is spoken about in different ways. Some admire him and are convinced that any management accounting system should be broken down into small processes, on the basis of which the cost is determined. But there is also an opposite opinion: ABC costing is too complicated, so it makes no sense to describe the processes in detail. Some are sure that the essence of ABC costing is that “Nadezhda Petrovna’s run along the corridor with an invoice costs 7 hryvnia 55 kopecks and should be attributed to one or another batch of products.” That is why he, like Janus, has two faces.

Let's see how management accounting treats the use of ABC costing, but first, let's remember what types of costing exist (Figure 1).

Evolution of costs (from absorption to ABC costing)

At first, the financiers were convinced that all the costs of the enterprise, one way or another, should be included in the cost price. This method was called cost absorption (cost absorption) and is still used in accounting (some are trying to use it in management accounting).

From the early 1940s to the late 1980s, the variable cost method became popular, according to which only variable costs are taken into account in the cost of products. At the same time, it does not matter what these costs were: part of the cost of production or, for example, part of overhead costs, like sellers' commissions - in any case, they were considered variable and included in the cost. In addition, there is nothing to hide, it is the method of calculating variable costs that is the system on the basis of which the most objective decisions are made.

The next in the period 1980-1990. was the concept of the so-called ABC-costing. Thanks to the development of IT, it has become possible to see the individual processes of the company, analyze them and understand how much they cost. The cost of processes, which cannot be dispensed with in the production and sale of products, clings to the cost of goods.

Another newfangled concept that became popular in the 1990s was target costing, sometimes referred to as the market standards paradigm. In this case, everything is generally turned upside down, if only because the financiers are trying to achieve a certain target cost.

Let's look at the price formation process in each of the above paradigms. The first paradigm of the era of the industrial revolution was valid until the 1940s. During this period, the commodity filling in the world was not yet so large, so the likelihood that all the goods would be bought was high. In those years, when calculating the cost, direct material and labor costs were used, overhead production and non-production costs clung with a certain coefficient. As a result, the total cost was formed, which already included both management costs and cost costs. The desired profit was sometimes added to this, and so the price was formed, based entirely on costs (table 1).

The absorption paradigm, despite the fact that it persists in accounting, could not survive on the market for a long time: an expensive product cannot compete in the market with cheaper ones. To what level can the price be reduced? The cost absorption paradigm did not provide an answer to this question.

Financiers began to conduct calculations differently. The variable component of all costs began to be correlated and calculated separately, including direct material and labor costs, the variable part of overhead non-production costs. This is how the variable cost was determined (Table 2). In theory, the company should not set the price below 125 monetary units. But selling a product at a price higher than 125 makes a profit. Under these conditions, all fixed costs are summed up separately and the product margin should cover them. Table 2 shows that the margin is: $203 - 125 = 78. As long as the product has a positive margin, it should be left in the product portfolio and continue to work with it. It should be noted that the variable cost calculation method has become a step forward compared to the absorption of expenses, and it has begun to be actively used in management accounting.

After the variable cost paradigm, which, in general, everyone was satisfied, a new paradigm came - ABC. It turned out that many companies have problems with fixed costs: the margin seems to be very high (variable costs are low and the price is high), but the bulk of the costs are actually fixed. At this stage, the calculation of variable costs began to slip. The owners of the company were hardly satisfied with the results when it was noted in the income statement that with fixed costs of several million, margins were also several million. In this case, it is not clear whether this or that product needs fixed costs or not. Thus, the need for ABC costing arose, which made it possible to resolve issues regarding which processes the company uses to manufacture and sell products, how much they cost, and what costs accumulated within these processes can be used for cost.

In ABC costing, not all costs are variable. A significant part of them is fixed, but they can be variable in proportion to some processes associated with business activity factors.

As shown in Table 3, the overhead costs accumulated at the unit level depend on the number of hours spent on the production of the product. Costs at the level of a complex of products (batch or order) can be the costs of a company that purchases several products in one batch. There are also costs accumulated at the level of product diversification (product range), for example, the costs of developing anti-crisis products should be attributed specifically to them. In addition, there are costs accumulated at the level of the complex of clients and customers. When a company is going to, say, celebrate the holidays with its biggest customers, that expense will be part of the customer-level cost.

How do companies get to this point?

At one time, when absorbing costs, everything was simple: fixed costs were collected together, divided into the number of machine hours and, on the basis of this, were “smeared” between products. However, there was a lack of precision.

Then the financiers decided, they say, we won't think like that anymore. You need to be smarter and try to distribute costs depending on the characteristics of the operating unit. For example, protection costs will depend on the number of square meters that are protected. As a result, a system was created in which the product was borne not only by single overhead costs with a certain coefficient, but also marketing costs with their own coefficient, financial department costs with their own, HR costs with their own. This is how the norms of individual centers arose, according to which overhead costs were distributed.

It soon became clear that centers are organizational units within which certain processes take place. By the way, some of the processes can be considered useful, creating added value, and some can not. At this stage, it was decided to isolate them separately, characterize them as business activities and transfer overhead costs depending on the part of this activity. They began to analyze different types of activity and determine their cost in order to cling to products. For this reason, ABC costing requires considerable detail and understanding of all processes occurring in each department.

When is ABC costing needed?

The functional cost system is used when the company is characterized by:

a large number of products;
many supporting processes;
standardized process;
periodic allocation base;
frequency of changes in costs.

Let's turn to tables 4 and 5. Each company produces three products - Alpha, Beta and Gamma. Both of them are unprofitable at the level of $100030. Company A has a fixed cost of $133,080. Margin data for each segment of this enterprise does not provide an answer to the question of what processes are used.

Company B is also unprofitable at $100,030, but its marginal profit in each of the directions, as well as fixed costs, is much higher than that of company A.

Based on the data in the table, it is easy to determine that company B needs ABC costing more, since its fixed costs are much higher and it is difficult to understand which of them make up the cost structure. To do this, you need to divide $269,080 between the company's processes and analyze who is the client of certain processes and who uses them. By the way, an indicator that may indicate the need for ABC is the operational leverage (OL), which is calculated as the ratio of profit margin to net profit and reflects the measure of the company's operational risk. So, for company A, this figure is:

OLA = 33050 / (-100030) = -0.3304;

for company B it is equal to:

OLV = 169050 / (-100030) = -1.6899.

The need for ABC costing increases as the module of this indicator increases.

ABC costing technology

The first question that arises when using ABC costing is: with what coefficient should the costs be distributed? There are several options. For example, with coefficients between which there is an obvious physical connection - the more materials a department uses, the greater its purchase costs and the higher the wages of the people who are engaged in these purchases.

Therefore, purchasing costs can be carried forward depending on the cost of materials. In addition, there are also objective and investigative factors: if more people work in the department, then HRs have more work. Why not transfer HR costs by man-hours?

There are also some points that the company sets itself. For example, a certain decision is made, on the basis of which standards are determined. Thus, advertising costs are allocated based on the percentage of sales for each financial reporting center. In addition, complex overhead cost transfer coefficients are sometimes constructed, which depend on complex formulas that take into account the values of several factors at once.

In addition, there is an arbitrary relationship, say, uniform distribution means fairness. And why not transfer the marketing costs equally to all the products that the company has, so that no one is offended. True, in this case, products with low margins will suffer.

Nor should the importance of the strategic allocation of overhead costs be underestimated when they are treated as required by the strategy. Moreover, in this case, justice should be forgotten.

Cost drivers

The list of cost drivers can be endless. Among other things, it may include, for example, the number of flowers on the windowsill, etc. People have come up with quite different cost drivers, but the most common and classic ones are:

number of machine hours;
number of man-hours;
Cost of materials;
the number of pieces of manufactured products;
the number of square (or cubic) meters in the room;
the total volume or part of the income received from the sale of products of a certain type;
the number of operations performed in connection with the production of the product;
specific technical characteristics of the product;
the part of the marginal profit that this product brings in the total marginal profit.

Building an ABC costing system

To build an ABC system, you first need to analyze all types of company activities. To do this, it is necessary, at least in general terms, to present a list of processes that occur with a certain periodicity. Then you should determine what costs the company incurs and whether they can be linked to the list of processes. After that, set the result for each activity. Their costs will form cost pools. After implementing all these actions, it will be possible to link costs to results.

Consider how this happens, say, in a company that is engaged in the general distribution of goods from one manufacturer through a centralized warehouse and a network of regional warehouses to branded end points of sale. How will this delivery take place? First, a large batch of products will go from the factory to a centralized warehouse (for example, in Kyiv), then, after reloading into smaller batches, it will be distributed to regional warehouses, and from there, after the next reorganization, they will be transported in small batches to the end stores of the region (Figure 2) .

The task seems to be simple: to deliver the goods, but this process includes a huge number of service sub-processes. To calculate the cost of delivery based on ABC costing, you need to understand which costs are present during transportation, and which are in warehouses. As for delivery, the main costs at this stage will include drivers' wages, vehicle depreciation and fuel. Expenses in warehouses - wages of all personnel, depreciation of lifting and transport mechanisms, etc. After different pools of expenses have been identified (delivery pool to the central warehouse, to stores, pools of warehouse terminals), the question arises of what indicators can identify each type of activity (all expenses should be linked to different types of activity). The next stage is the definition of an indicator that would indicate the quality of work performance. It turns out that on the route this indicator will be ton-kilometers, in the warehouse - overloaded tons. If you know the number of tons and ton-kilometers at each stage of delivery, as well as the unit cost of these indicators, then, knowing the weight of the goods and the distance to which it should be delivered, you can determine the cost of delivery services.

To organize accounting for pools, it will be necessary for each of them to open an account similar to a regular overhead account. On the debit of such accounts, the costs attributed to this pool will be accumulated, and on the credit, these costs will be transferred with a coefficient characterizing the pool’s business activity for the cost price (in our case, transportation). You will have to open a pool for each route and several pools for each individual warehouse. You can immediately foresee the "joy" of those accountants who will have to do all this work.

Benefits and pitfalls of ABC costing

Analyzing the benefits of cost-benefit analysis of costs, it should be remembered that within such a system:

the company pays attention exclusively to the main processes;
all costs are considered as components of the cost;
the company abandons the short-term division of costs into fixed and variable and focuses on what processes are needed to create a product;
it becomes possible to identify high-cost activities, as well as those that do not create value.

The following circumstances act as peculiar pitfalls:

ABC costing requires fairly heavy cost absorption—spreading out a large amount of fixed costs;
additional finance department resources are needed;
this system can be implemented in different ways: you can make every effort and paint all the pools of expenses very accurately, or you can do it not very diligently;
the result obtained, most likely, will not show to what level the price of the product can be reduced;
a company can get an accurate result, but it happens that too much effort is spent on it;
the use of ABC costing does not require a concentration on individualized products that are produced for the client, but forces you to follow the principle: "Produce a mass product." But will it be compatible with the company's marketing strategy?

Of course, it is almost impossible to overestimate the role of the cost-benefit system of cost analysis: in some cases, it is simply indispensable to do without it. Therefore, companies should use not only variable costing, but also ABC consulting, and also determine cost pools. In addition, it is necessary to allocate all costs by pools and stop in time when detailing ABC costing, because ABC costing, like Janus, is twofold and ambiguous.

Since this is not all that can be said about ABC costing, the authors plan to return to this topic in the future.

Mikhailo Kolisnyk

Alexander Rizenko

One of the principles for calculating the cost of products (works, services) is the choice of a method for distributing indirect (overhead) costs between the objects of calculation. For a long time in domestic and foreign practice, the basis for the distribution of overhead costs was direct labor costs for the production of a unit of output, since they were easily planned and taken into account. Automation of production processes and an increase in the cost of infrastructure resources not directly related to production activities (expenses for the sale, adjustment and readjustment of equipment, technical control of products, etc.) contributed to an increase in the share of overhead costs in the cost structure and created the prerequisites for expanding the list of methods allocation of overhead costs.

Modern possibilities of automation of accounting and settlement tasks allow an economic entity to choose methods for distributing overhead costs, based on the specifics of their activities, and to coordinate them with methods of cost accounting and costing. At manufacturing enterprises, the following methods of cost accounting and costing are used: standard, custom, per-order, per-process, cost accounting by function.

Consider the features of the application of the order-by-order method and cost accounting by function. The use of both methods requires the presence of a reliable system of production planning and control in the enterprise.

Custom Method

With custom costing the object of calculation is a separate order, a separate job, which are carried out in accordance with the special requirements of the customer and the lead time for which is relatively short. A separate analytical account is opened for each order, and until the end of the work, all costs are considered work in progress. When placing an order, accounting estimates are prepared.

An order passes through a series of operations as a continuously defined unit in a factory or workshop. Each cost unit is different from any other cost unit. If some orders are repeated periodically, the costs are determined anew. With a large variety of orders, work on each of them is carried out on production equipment for short periods of time.

Cost information is accumulated separately for each executed order. The primary record for this information is the Order Fulfillment Cost Sheet/Sheet or Quote Card, which is completed on a case-by-case basis for all orders and is regularly adjusted to reflect any costs associated with a particular order. The calculation card is based on the construction of the type of calculation account.

The total cost of an order recorded on a cost card can be immediately analyzed in comparison to any pre-order estimate information recorded on the same card prior to work on the order. Special purchases or other direct costs incurred are also recorded on the cost card.

As the order passes through the various production cost centers of the enterprise, each order receives its own share of the plant's production overheads. Accrual is carried out on the basis of the selected distribution bases.

The time spent on each order is taken into account in order shop orders or time sheets by the persons performing the work, estimated by the costing department, and the corresponding data is entered on the cost accounting card. After the order is completed, a surcharge is reflected in the order-based cost accounting card to cover the costs of sales and administrative costs. The agreed selling price is then compared with the total cost of the order and the financial result of the order is determined.

A continuation of the order method is the contract method of costing, which is used in cases where the orders (contracts) in question are large-scale and their implementation provides for a long period of time (usually more than one year). Examples of industries where contract costing methods are used are mechanical engineering, road construction, etc.

Cost accounting by function (ABC method)

Apply costing by function or ABC-method also has a number of features. The object of cost accounting in this case is a separate type of activity (function, operation), and the object of calculation is the type of product (work, service). Fundamental difference ABC-method from other methods of cost accounting and costing is in the order of allocation of overhead costs.

Consider the algorithm for calculating the cost using ABC-method.

First, the main activities of the organization are distinguished - functions or operations. The number of activities depends on its complexity: the more complex the business, the more functions will be allocated. The overhead costs of the organization are identified with the identified activities.

For each type of activity, its own cost carrier is determined, which is evaluated in the appropriate units of measure. Wherein two rules must be followed:

data relating to the cost carrier should be easily obtained;
the measurement of costs through the cost carrier must correspond to their actual value.

For example, the equipment changeover function can be measured by the number of changeovers required, the order taking function by the number of registered orders.

Overhead costs are distributed per unit of output: the cost per unit of the cost carrier is multiplied by their number for those types of activities (functions), the implementation of which is necessary for the manufacture of products (works, services). As a result, all costs are summarized and the unit cost of a product (work, service) is determined.

Note! ABC- the method is effective for enterprises whose activities are characterized by a high level of overhead costs, and is an alternative to the order-based method of cost accounting and costing.

Example

We will calculate the cost of production using the ABC method and the order method and compare the results.

As an example, consider the virtual enterprise "Stack", which produces shelving structures for various purposes: cargo, archival and universal.

An analysis of the shelving manufacturing process revealed eight main functions (activities):

1) labor consumption;

2) ;

3) placing orders;

4) changeover of equipment;

5) delivery of materials;

6) ;

7) product quality control;

8) .

Each activity has its own cost driver. Table 1 presents data from accounting registers, distributed by type of activity and by type of product.

Table 1. Functions and their corresponding cost drivers
Functions	Cost carrier	Cost object value (number of operations), total	including by type of product
Functions	Cost carrier	Cost object value (number of operations), total	cargo racks	archival shelving	universal shelving
Labor consumption	man hours
Operation of the main equipment	machine hours
Order processing	the number of orders
Equipment changeover	number of changeovers
Delivery of materials	number of batches received
Tool consumption	tool quantity
Product quality control	number of control operations
Operation of auxiliary equipment	machine hours

In order to form the cost of each type of rack structures, it is necessary to calculate direct costs and overhead costs.

We will calculate the direct costs for the production of each type of product. Table 2 shows the unit costs (columns 3, 5 and 7) and the volume of output of each type of product (column 2), on the basis of which the total costs of time, materials and labor costs are calculated.

Table 2. Calculation of the fund of time and direct costs associated with the release of products
Product type	Number of product units	Direct labor costs per unit of output	Total time	Direct material costs per unit of output	Total direct material costs	Direct wages per unit of output	Total direct labor costs
Product type
			4	5	6	7
Calculation algorithm			gr. 2 × gr. 3		6gr. 2 × gr. 5		gr. 2 × gr. 7
cargo racks
Archival shelving
Universal racks

The next step in the calculation is the allocation of overhead costs. To calculate the cost per operation, we divide the amount of overhead costs for each function (type of activity) by the number of operations for the corresponding cost carrier (Table 3).

Table 3. Calculation of the unit cost of the cost carrier by type of activity
Function	Overheads,	Cost object value (number of operations)	Unit cost of the cost carrier (amount of cost per operation)	Cost Object Units

Calculation algorithm			gr. 2 / gr. 3
Labor consumption				rub./person-hour
Operation of the main equipment				rub./machine-hour
Order processing				RUB/order
Equipment changeover				rub./changeover
Delivery of materials				RUB/delivery
Tool consumption				rub./tool
Product quality control				rub./control
Operation of auxiliary equipment				rub./machine-hour

Let's allocate overhead costs by type of product. To do this, we multiply the costs per operation (item 4 of Table 3) by the number of operations for each cost carrier (Table 4).

Table 4. Distribution of overhead costs by type of product
Function	cargo racks		Archival shelving		Universal racks
Function	cost object value (number of operations)	Cost, rub.)	cost object value	Cost, rub.)	cost object value	Cost, rub.)

Labor consumption
Operation of the main equipment
Order processing
Equipment changeover
Delivery of materials
Tool consumption
Product quality control
Operation of auxiliary equipment
Total overhead
Number of products released
Overhead costs per unit of production

So, one cargo rack accounts for 10,359.07 rubles, for archival racks - 8539.17 rubles, and for universal racks - 3578.11 rubles. overhead.

The calculation of the unit cost of rack products using the ABC method is given in Table. 7.

Now consider the formation of the cost of production using the order method. We will choose direct labor costs as the basis for the distribution of overhead costs.

Let's calculate the budget rate of distribution of overhead costs (tab. 5). To do this, we divide the total amount of overhead costs (Article 2 of Table 3) by the working time fund (Article 4 of Table 2).

Table 5. Calculation of the budget rate for the distribution of overheads under the order method
Name	Meaning	unit of measurement
Overheads
Direct labor costs
Budgeted overhead allocation rate

Direct material costs and wages, as well as the fund of time by type of product are known (Table 2). Calculate production overheads: multiply the budget rate of distribution of overheads by the time of manufacturing a unit of production. Let's determine the unit cost of each type of rack products (Table 6).

Table 6. Calculation of the unit cost of rack products when using the order method
Expenses	Product types
Expenses	cargo equipment	archival equipment	universal equipment

Direct salary, rub.
Issue volume, pcs.
Total time, h
Time to manufacture a unit of production, h

In table. 7 presents a comparative analysis of the results of calculating the production cost using two methods.

*Table 7. Comparison of costing results when using ABC- and custom methods*
Expenses	ABC- method			Custom Method
Expenses	cargo racks	Archival shelving	Universal racks	cargo racks	Archival shelving	Universal racks
Direct material costs, rub.
Direct salary, rub.
Production overheads, rub.

Summary

1. The order-based method allows you to quickly and easily allocate the organization's overhead costs, but it takes into account the behavior of only one indicator - labor costs per unit of production - and does not take into account the influence of other factors, such as product quality control. Therefore, the custom costing method should be used in cases where the share of overhead costs in the total cost is small, otherwise the distortion of the degree of influence of individual factors will be significant.

2. For an enterprise whose business process consists of a large number of operations, the ABC method is preferable. Its use will allow you to make more effective decisions in the field of marketing strategy, product profitability, etc., because it gives you the opportunity to control costs at the stage of their occurrence.

3. The correct assessment of the real cost is one of the levers for managing profits and business performance. And the definition of ways to reduce costs is the most important factor in the development of the economy of an economic entity.

I. N. Kostenko, Art. Lecturer, NOU HPE "Tomsk Institute of Business"