Companies do not include fixed costs. Fixed costs (TFC), variable costs (TVC) and their schedules

variable costs These are costs, the value of which depends on the volume of output. Variable costs are opposed to fixed costs, which add up to total costs. The main sign by which it is possible to determine whether costs are variable is their disappearance during a stop in production.

Note that variable costs are the most important indicator of an enterprise in management accounting, and are used to create plans to find ways to reduce their weight in total costs.

What is variable cost

Variable costs have a major distinguishing feature- they vary depending on the actual production volumes.

Variable costs include costs that are constant per unit of output, but their total amount is proportional to the volume of output.

Variable costs include:

raw material costs;

expendable materials;

energy resources involved in the main production;

main salary production staff(together with charges);

price transport services.

These variable costs are directly charged to the product.

In value terms, variable costs change when the price of goods or services changes.

How to find variable costs per unit of output

In order to calculate the variable costs per unit (or other unit of measure) of a product manufactured by a company, you should divide the total amount of variable costs incurred by total amount finished products, expressed in natural values.

Classification of variable costs

In practice, variable costs can be classified according to the following principles:

According to the nature of the dependence on the volume of output:

proportional. I.e variable costs increase in direct proportion to the increase in output. For example, the volume of production increased by 30% and the amount of costs also increased by 30%;

degressive. As production increases, the company's variable costs decrease. So, for example, the volume of production increased by 30%, while the size of variable costs increased by only 15%;

progressive. That is, variable costs increase relatively more with output. For example, the volume of production increased by 30%, and the amount of costs by 50%.

Statistically:

general. That is, variable costs include the totality of all variable costs of the enterprise across the entire product range;

average - average variable costs per unit of production or group of goods.

According to the method of attribution to the cost of production:

variable direct costs - costs that can be attributed to the cost of production;

variable indirect costs - costs that depend on the volume of production and it is difficult to assess their contribution to the cost of production.

In relation to the production process:

production;

non-production.

Direct and indirect variable costs

Variable costs are either direct or indirect.

Production variable direct costs are costs that can be attributed directly to the cost of specific products based on primary accounting data.

Production variable indirect costs are costs that are directly dependent or almost directly dependent on the change in the volume of activity, however, due to the technological features of production, they cannot or are not economically feasible to be directly attributed to manufactured products.

The concept of direct and indirect costs is disclosed in paragraph 1 of Article 318 of the Tax Code of the Russian Federation. Thus, according to tax legislation, direct expenses, in particular, include:

expenses for the purchase of raw materials, materials, components, semi-finished products;

wages of production personnel;

depreciation on fixed assets.

Note that enterprises can include in direct costs and other types of costs directly related to the production of products.

At the same time, direct expenses are taken into account when determining the tax base for income tax as products, works, services are sold, and written off to the tax cost as they are implemented.

Note that the concept of direct and indirect costs is conditional.

For example, if the main business is transportation services, then drivers and car depreciation will be direct costs, while for other types of business, maintaining vehicles and remunerating drivers will be indirect costs.

If the cost object is a warehouse, then the storekeeper's wages will be included in direct costs, and if the cost object is the cost of manufactured and sold products, then these costs (storekeeper's wages) will be indirect costs due to the impossibility of unambiguously and the only way attribute it to the cost object - cost.

Examples of Direct Variable Costs and Indirect Variable Costs

Examples of direct variable costs are costs:

for the remuneration of workers involved in the production process, including accruals on their wages;

basic materials, raw materials and components;

electricity and fuel used in the operation of production mechanisms.

Examples of indirect variable costs:

raw materials used in complex production;

expenses for research and development, transportation, travel expenses, etc.

conclusions

Due to the fact that variable costs change in direct proportion to the production volume, and the same costs per unit of finished product usually remain unchanged, when analyzing this type of cost, the value per unit of production is initially taken into account. In connection with this property, variable costs are the basis for solving many production tasks related to planning.

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Variable Costs: Accountant Details

• Operational leverage in the main and paid activities of the BU

  They are useful. Management of fixed and variable costs, as well as their associated operational ... in the structure of the cost of fixed and variable costs. The effect of operating leverage arises... variable and conditionally constant. Conditionally variable costs change in proportion to the change in the volume of provided ... constant. Conditionally fixed costs Conditionally variable costs Maintaining and maintaining buildings and ... the price of the service falls below the variable costs, it remains only to curtail production, ...

Example 2. In reporting period variable costs for the production of finished products, reflected .... The cost of production includes variable costs in the amount of 5 million rubles... Debit Credit Amount, rub. Reflected variable costs 20 10, 69, 70, ... Part of general factory costs added to the variable costs that form the cost 20 25 1 ... Debit Credit Amount, rub. Variable costs are reflected 20 10, 69, 70, ... Part of general factory costs is added to the variable costs that form the cost price 20 25 1 ...

• Financing the state task: examples of calculations
• Does it make sense to divide costs into variable and fixed costs?

  It is the difference between revenue and variable costs, shows the level of reimbursement of fixed ... costs; PermZ - variable costs for the entire volume of production (sales); permS - variable costs per unit...increased. Accumulation and distribution of variable costs When choosing a simple direct costing ... semi-finished products own production accounted for as variable costs. Moreover, complex raw materials, with ... The total cost on the basis of the distribution of variable costs (for output) will be ...

• Dynamic (temporary) profitability threshold model

  For the first time he mentioned the concepts of "fixed costs", "variable costs", "progressive costs", "degressive costs". ... The intensity of variable costs or variable costs per working day (day) is equal to the product of the value of variable costs per unit ... total variable costs - the value of variable costs per unit of time, calculated as the product of variable costs by ... respectively, total costs, fixed costs, variable costs and sales. The above integration technology...

• Director's questions to which the chief accountant should know the answers

  Equality: revenue = fixed costs + variable costs + operating profit. We are looking for... products = fixed cost/ (price - variable cost/unit) = fixed cost: marginal... fixed cost + target profit) : (price - variable cost/unit) = (fixed cost + target profit ... equation: price = ((fixed costs + variable costs + target profit) / target sales volume ... , in which only variable costs are taken into account. Marginal profit - revenue ...

Any firm functions for the sake of generating income, and its work is impossible without the funds spent. Exist different kinds such expenses. There are activities for which constant investments of finance are required. But some of the costs are not regular, and their impact on the course of the product and its sale must also be taken into account.

So, the main meaning of the work of any company is to release a product and receive income from it. To start this activity, you need to first acquire raw materials, tools of production, hire labor force. Certain finances are spent on this, in economics they are called costs.

People invest in production activities with the most different purposes. Accordingly, the classification of expenses was adopted. Categories of costs (depending on properties):

• Explicit. Such costs are made directly, for the payment of wages to employees, commissions to other organizations, payment for the activities of banks and transport.
• Implicit. Costs for the needs of company executives that are not specified in the contracts.
• Permanent. The means by which continuous production processes are provided.
• Variables. Costs that can easily be adjusted while maintaining the same level of output.
• Irrevocable. Expenses of movable assets that are invested in the activities of the company free of charge. peculiar initial period production or re-profiling of the organization. These funds can no longer be spent on other organizations.
• Medium. Costs obtained in the course of calculations, characterizing investments in each unit of the product. This indicator contributes to the pricing of goods.
• Limit. This is the largest cost that cannot be increased due to the low efficiency of capital investments in the company.
• Appeals. The cost of delivering goods from the producer to the consumer.

Application of fixed and variable costs

Consider the differences between fixed costs and variables, their economic characteristics.

The first type of costs (fixed) is designed for investments in the manufacture of a product in a single production cycle. In each organization, their size is individual, so the enterprise considers them separately, taking into account the analysis of the release process. Note that such costs will not differ from the initial production stage before selling the product to the consumer.

The second type of costs (variables) changes in each production cycle, practically without repetition of this indicator.

The two types of costs together make up the total costs, which are calculated at the end of the production process.

Simply put, fixed costs- those that remain unchanged in a certain period of time. What can be attributed to them?

1. payment of utility services;
2. The cost of operating the premises;
3. payment of rent;
4. The salary of the staff;

It must be taken into account that the constant level of total costs used in a specific time period of production, during one cycle, refers only to the total number of units of goods produced. If we calculate such costs for each unit, their size will decrease in accordance with the growth in output. This fact applies to all types of production.

Variable costs are proportional to the variable quantity or volume of the product produced.. These include:

1. Energy costs;
2. Material costs;
3. Contractual wages.

This type of cost is closely related to the volume of output of the product, as a result of which it changes according to the indicators of the production of this product.

Cost examples:

Each production cycle corresponds to a specific amount of costs that remain unchanged under any conditions. There are other costs that depend on production resources. As previously stated, costs over a short period of time are variable and fixed.

For a long time, such characteristics are not suitable, because. costs will change in this case.

Fixed Cost Examples

Fixed costs remain at the same level for any volume of output of the product, in a small time period. This is the cost of stable factors of the company, not proportional to the number of units of goods. Examples of such expenses are:

• payment of interest on a bank loan;
• depreciation expenses;
• payment of interest on bonds;
• salary for managers at the enterprise;
• insurance costs.

All costs, independent of the production of a product, which are unchanged in a short period of the production cycle, can be called constant.

Variable Cost Examples

Variable costs, on the other hand, are essentially investments in the production of goods, and therefore depend on its volume. The amount of investment is directly proportional to the amount of goods produced. Examples would be spending on:

• on stocks of raw materials;
• payment of bonuses to employees producing products;
• delivery of materials and the product itself;
• energetic resources;
• equipment;
• other expenses for the production of goods or the provision of services.

Consider a graph of variable costs, which is a curve. (Figure 1.)

Fig.1 - variable cost schedule

The path of this line from the origin to point A depicts an increase in costs with an increase in the quantity of goods produced. Section AB: more rapid increase in costs in terms of mass production. Variable costs can be affected by disproportionate costs for transport services or consumables, improper use of a released product with reduced demand for it.

Example of calculating production costs:

Consider the calculation of fixed and variable costs on a specific example. Let's say a shoe company produces 2,000 pairs of boots in a year. During this time, the factory spends funds on the following needs:

• rent - 25,000 rubles;
• interest on a bank loan - 11,000 rubles;
• payment for the production of one pair of shoes - 20 rubles;
• raw materials for the production of a pair of boots - 12 p.

Our task: to calculate the variable, fixed costs, as well as the funds spent on each pair of shoes.

In this case, only rent and loan payments can be called fixed costs. Such costs are unchanged, depending on production volumes, so it is easy to calculate them: 25,000 + 11,000 = 36,000 rubles.

The cost of producing one pair of shoes is variable costs: 20+12=32 rubles.

Consequently, the annual variable costs are calculated as follows: 2000*32=64000 rubles.

General costs- this is the sum of variables and constants: 36,000 + 64,000 \u003d 100,000 rubles.

Average total cost per pair of shoes: 100,000/20=50

Production cost planning

It is important for every company to correctly calculate, plan and analyze production costs.

In the process of cost analysis, options are considered for the economical use of finance that is invested in output and should be distributed correctly. This leads to a decrease in the cost, and hence the final price of the manufactured goods, as well as an increase in the competitiveness of the company and an increase in its income.

The task of each company is to save as much as possible on production and optimize this process so that the enterprise develops and becomes more successful. As a result of these measures, the profitability of the organization also increases, which means that there are more opportunities to invest in it.

To plan production costs, you need to take into account their size in previous cycles. In accordance with the volume of goods produced, a decision is made to reduce or increase production costs.

Balance sheet and costs

Among the accounting documentation of each company there is a "Profit and Loss Statement". This is where all your expenses are recorded.

A little more about this document. This report does not characterize the property status of the enterprise in general, but provides information about its activities for the selected time period. In accordance with OKUD, the profit and loss statement has a form 2. Income and expenses are recorded in it incrementally from the beginning to the end of the year. The report includes a table, in line 020 of which the main costs of the organization are displayed, in line 029 - the difference between profit and costs, in line 040 - expenses included in account 26. The latter are travel expenses, payment for the protection of premises and labor, employee remuneration. Line 070 shows the company's interest on credit obligations.

The initial results of the calculations (when compiling the report) are divided into direct and indirect costs. If we consider these indicators separately, then direct costs can be considered fixed costs, and indirect costs - variables.

In the balance sheet, cost data is not recorded directly, it shows only the assets and financial liabilities of the enterprise.

Accounting costs (otherwise called explicit)- is a payment in cash equivalent of any transactions. They are closely related to the economic costs and income of the firm. We subtract the explicit costs from the company's profit, and if we get zero, then the organization has used its resources in the most correct way.

Cost Calculation Example

Consider an example of calculating accounting and economic costs and profits. The owner of the recently opened laundry planned to receive an income of 120,000 rubles a year. To do this, he will have to cover the costs:

• rent of premises - 30,000 rubles;
• salary for administrators - 20,000 rubles;
• purchase of equipment - 60,000 rubles;
• other small expenses - 15,000 rubles;

Credit payments - 30%, deposit - 25%.

The head of the enterprise bought the equipment at his own expense. Washing machines break down after a while. Given this, it is necessary to create a depreciation fund, into which 6,000 rubles will be transferred every year. All of the above are explicit costs. Economic costs - the possible profit of the owner of the laundry, in case of acquiring a deposit. To pay the initial expenses, he will have to use a bank loan. Loan in the amount of 45,000 rubles. will cost him 13,500 rubles.

Thus, we calculate explicit costs: 30 + 2 * 20 + 6 + 15 + 13.5 = 104.5 thousand rubles. Implicit (deposit interest): 60 * 0.25 = 15 thousand rubles.

Accounting income: 120-104.5 \u003d 15.5 thousand rubles.

Economic income: 15.5-15=0.5 thousand rubles.

Accounting and economic costs differ from each other, but they are usually considered together.

The value of production costs

Production costs form the law of economic demand: with an increase in the price of a product, its level increases. market supply, and with a decrease, the supply also decreases, while maintaining other conditions. The essence of the law is that each manufacturer wants to offer maximum amount goods at the highest price, which is the most profitable.

For the buyer, the cost of the goods is a deterrent. The high price of a product forces the consumer to buy less of it; and, accordingly, cheaper products are purchased in large volumes. The manufacturer receives a profit for the product released, so he seeks to produce it in order to acquire revenue from each unit of the product, in the form of its price.

What is the main role of production costs? Consider it on the example of processing industrial enterprise. In a certain period of time, production costs increase. To compensate for them, you need to raise the price of the product. The increase in costs is due to the fact that it is impossible to quickly expand the production area. The equipment is overloaded, which reduces the efficiency of the enterprise. Thus, for the release of goods with the biggest cost the firm must charge a higher price for it. Price and supply level are directly related.

The costs of the enterprise can be considered in the analysis from different points of view. Their classification is based on various characteristics. From the standpoint of the impact of product turnover on costs, they can be dependent or independent of the increase in sales. Variable costs, an example of the definition of which requires careful consideration, allow the head of the company to manage them by increasing or decreasing the sale of finished products. That is why they are so important to understand. proper organization activities of any enterprise.

general characteristics

Variables (Variable Cost, VC) are those costs of the organization that change with an increase or decrease in the growth of sales of manufactured products.

For example, when a company goes out of business, variable costs should be zero. To operate effectively, a business will need to evaluate its cost performance on a regular basis. After all, they affect the size of the cost of finished products and turnover.

Such items.

• The book value of raw materials, energy resources, materials that are directly involved in the production of finished products.
• The cost of manufactured products.
• The salary of employees, depending on the implementation of the plan.
• Percentage of the activities of sales managers.
• Taxes: VAT, STS, UST.

Understanding Variable Costs

In order to correctly understand such a concept as variable costs, an example of their definition should be considered in more detail. So, production is in the process of fulfilling its production programs spends a certain amount of materials from which the final product will be made.

These costs can be classified as variable direct costs. But some of them should be shared. A factor such as electricity can also be attributed to fixed costs. If the cost of lighting the territory is taken into account, then they should be attributed to this category. Electricity, directly involved in the process of manufacturing products, refers to variable costs in the short term.

There are also costs that depend on turnover but are not directly proportional to the production process. Such a trend may be caused by insufficient workload (or excess) of production, a discrepancy between its design capacity.

Therefore, in order to measure the effectiveness of an enterprise in managing its costs, one should consider variable costs as obeying a linear schedule over a segment of normal production capacity.

Classification

There are several types of variable cost classifications. With a change in costs from implementation, a distinction is made between:

• proportional costs, which increase in exactly the same way as the volume of production;
• progressive costs that increase at a faster rate than implementation;
• degressive costs, which increase at a slower rate as the rate of production increases.

According to statistics, the company's variable costs can be:

• general (Total Variable Cost, TVC), which are calculated for the entire product range;
• averages (AVC, Average Variable Cost), calculated per unit of goods.

According to the method of accounting in the cost of finished products, variables are distinguished (they are simply attributed to the cost) and indirect (it is difficult to measure their contribution to the cost).

With regard to the technological output of products, they can be industrial (fuel, raw materials, energy, etc.) and non-productive (transportation, interest to an intermediary, etc.).

General variable costs

The output function is similar to variable costs. She is continuous. When all costs are brought together for analysis, the total variable costs for all products of one enterprise are obtained.

When common variables are combined and their total sum in the enterprise is obtained. This calculation is carried out in order to reveal the dependence of variable costs on the volume of production. Further, the formula is used to find variable marginal costs:

MS = ∆VC/∆Q where:

• MC - marginal variable costs;
• ΔVC - increase in variable costs;
• ΔQ - increase in output.

Average cost calculation

Average variable cost (AVC) is the amount of resources a company spends per unit of output. Within a certain range, production growth has no effect on them. But when the design capacity is reached, they begin to increase. This behavior of the factor is explained by the heterogeneity of costs and their increase with large scale production.

The presented indicator is calculated as follows:

AVC=VC/Q where:

• VC - the number of variable costs;
• Q - the number of products released.

In terms of measurement parameters, average variable costs in the short run are similar to changes in average total costs. The greater the output of finished products, the more total costs begin to match the growth of variable costs.

Variable cost calculation

Based on the above, the variable cost (VC) formula can be defined as:

• VC = Cost of materials + Raw materials + Fuel + Electricity + Bonus salary + Percentage of sales to agents.
• VC = Gross Profit - Fixed Costs.

The sum of variable and fixed costs is equal to the total cost of the organization.

The calculation of which was presented above, participate in the formation of their general indicator:

Total Costs = Variable Costs + Fixed Costs.

Definition example

To better understand the principle of calculating variable costs, consider an example from the calculations. For example, a company characterizes its output as follows:

• The cost of materials and raw materials.
• Energy costs for production.
• Wages of workers producing products.

It is argued that variable costs grow in direct proportion with the increase in sales of finished products. This fact is taken into account to determine the break-even point.

For example, it was calculated that it amounted to 30 thousand units of production. If you build a graph, then the level of break-even production will be zero. If the volume is reduced, the company's activities will move into the plane of unprofitability. And similarly, with an increase in production volumes, the organization will be able to receive a positive net profit result.

How to reduce variable costs

The strategy of using the "scale effect", which manifests itself with an increase in production volumes, can increase the efficiency of the enterprise.

The reasons for its appearance are as follows.

1. Using the achievements of science and technology, conducting research, which increases the manufacturability of production.
2. Reducing the cost of salaries of managers.
3. Narrow specialization of production, which allows you to perform each stage of production tasks with higher quality. This reduces the marriage rate.
4. Implementation of technologically similar production lines, which will provide additional capacity utilization.

At the same time, variable costs are observed below sales growth. This will increase the efficiency of the company.

Having become acquainted with such a concept as variable costs, an example of the calculation of which was given in this article, financial analysts and managers can develop a number of ways to reduce overall production costs and reduce product costs. This will make it possible to effectively manage the pace of turnover of the company's products.

Question 10. Types of production costs: fixed, variable and general, average and marginal costs.

Each firm in determining its strategy focuses on maximizing profits. At the same time, any production of goods or services is unthinkable without costs. The company incurs specific costs for the acquisition of factors of production. In doing so, it will seek to use such manufacturing process, at which a given volume of production will be provided at the lowest cost for the applied factors of production.

The cost of acquiring the factors of production used is called production costs. Costs are the expenditure of resources in their physical, in-kind form, and costs are valuation costs incurred.

From the point of view of an individual entrepreneur (firm), there are individual production costs, representing the costs of a particular business entity. The costs incurred for the production of a certain volume of some product, from the point of view of the entire national economy, are public costs. In addition to the direct costs of producing a range of products, they include costs for environmental protection, training a skilled workforce, basic R&D, and other costs.

Distinguish between production costs and distribution costs. Production costs are the costs directly associated with the production of goods or services. Distribution costs are the costs associated with the sale of products. They are divided into incremental and net distribution costs. The former include the costs of bringing the manufactured products to the direct consumer (storage, packaging, packaging, transportation of products), which increase the final cost of the goods; the second - the costs associated with changing the form of value in the process of buying and selling, converting it from commodity to monetary (wages of trade workers, advertising costs, etc.), which do not form a new value and are deducted from the value of the goods.

fixed costsTFC These are costs that do not change with changes in the volume of production. The presence of such costs is explained by the very existence of some production factors, so they take place even when the company does not produce anything. On the graph, fixed costs are depicted by a horizontal line parallel to the x-axis (Fig. 1). Fixed costs include the cost of salaries of management personnel, rent payments, insurance premiums, deductions for depreciation of buildings and equipment.

Rice. 1. Fixed, variable and general costs.

variable costsTVC are costs that vary with the volume of production. These include the cost of wages, the purchase of raw materials, fuel, auxiliary materials, payment for transport services, relevant social contributions, etc. Figure 1 shows that variable costs increase as output increases. However, one regularity can be traced here: at first, the growth of variable costs per unit of production growth proceeds at a slow pace (up to the fourth unit of production according to the schedule of Fig. 1), then they grow at an ever-increasing pace. This is where the law of diminishing returns comes into play.

The sum of fixed and variable costs at any given volume of production forms the total cost TC. The graph shows that in order to obtain a curve of total costs, the sum of fixed costs TFC must be added to the sum of variable costs TVC (Fig. 1).

An entrepreneur is interested not only in the total cost of goods or services produced by him, but also in average cost, i.e. firm's costs per unit of output. When determining the profitability or unprofitability of production, average costs are compared with the price.

Average costs are divided into average fixed, average variable and average total.

Average fixed costsA.F.C. - are calculated by dividing the total fixed costs by the number of products produced, i.e. AFC = TFC/Q. Since the value of fixed costs does not depend on the volume of production, the configuration of the AFC curve has a smooth downward character and indicates that with an increase in the volume of production, the amount of fixed costs falls on an ever-increasing number of units of output.

Rice. 2. Curves of average costs of the firm in the short run.

Average variable costsAVC - are calculated by dividing the total variable costs by the corresponding amount of output, i.e. AVC=TVC/Q. Figure 2 shows that average variable costs first decrease and then increase. This is also where the law of diminishing returns comes into play.

Average total costATC - are calculated by the formula ATC = TC/Q. In Figure 2, the average total cost curve is obtained by vertically adding the average constant AFC and the average variable cost AVC. The ATC and AVC curves are U-shaped. Both curves, by virtue of the law of diminishing returns, bend upwards at sufficiently high volumes of production. With an increase in the number of employed workers, when constant factors are unchanged, labor productivity begins to fall, causing a corresponding increase in average costs.

The category of variable costs is very important for understanding the behavior of a firm. marginal costMC is the additional cost associated with the production of each subsequent unit of output. Therefore, MC can be found by subtracting two adjacent gross costs. They can also be calculated using the formula MC = TC/Q, where Q = 1. If fixed costs do not change, then marginal costs are always marginal variable costs.

Marginal cost shows the change in costs associated with a decrease or increase in the volume of production Q. Therefore, comparing MC with marginal revenue (revenue from the sale of an additional unit of output) is very important for determining the behavior of a firm in market conditions.

Rice. 3. Relationship between productivity and costs

From Fig. 3 it can be seen that between the dynamics of changes in the marginal product (marginal productivity) and marginal cost(as well as average product and average variable costs) there is Feedback. As long as marginal (average) product rises, marginal (average variable) costs will fall and vice versa. At the points of maximum value of the marginal and average products, the value of marginal MC and average variable costs AVC will be minimal.

Consider the relationship between total TC, average AVC, and marginal MC costs. To do this, we supplement Fig. 2 with the marginal cost curve and combine it with Fig. 1 in one plane (Fig. 4). An analysis of the configuration of the curves allows us to draw the following conclusions that:

1) at the point but, where the marginal cost curve reaches its minimum, the total cost curve TC changes from convex to concave. This means that after the dot but with the same increments of the total product, the magnitude of changes in total costs will increase;

2) the marginal cost curve intersects the curves of average total and average variable costs at the points of their minimum values. If marginal cost is less than average total cost, the latter decrease (per unit of output). Hence, in Figure 4a, the average total cost will fall as long as the marginal cost curve passes below the average total cost curve. Average total cost will rise where the marginal cost curve is above the average total cost curve. The same can be said for the marginal and average variable cost curves MC and AVC. As for the curve of average fixed costs AFC, then there is no such dependence, because the curves of marginal and average fixed costs are not related to each other;

3) Marginal cost is initially lower than both average total and average costs. However, due to the operation of the law of diminishing returns, they exceed both of them as output increases. It becomes obvious that further expansion of production, increasing only labor costs, is economically unprofitable.

Fig.4. The relationship of total, average and marginal production costs.

Changes in resource prices and production technologies lead to a shift in cost curves. So, an increase in fixed costs will lead to an upward shift in the FC curve, and since fixed costs AFC are integral part common, then the curve of the latter will also shift upward. As for the curves of variables and marginal costs, the growth of fixed costs will not affect them in any way. An increase in variable costs (for example, a rise in the cost of labor) will cause an upward shift in the curves of average variables, total and marginal costs, but will not affect the position of the fixed cost curve in any way.

Fixed and variable costs are the costs that a company incurs to produce goods, works or services. Cost planning allows you to use existing resources more efficiently, as well as predict activities for the future. Analysis - find the most costly items of expenditure and save on the production of goods.

What are costs

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Variable costs change, depending on changes in production volumes. With an increase in the amount of output, variable costs will also increase, and, conversely, with a decrease in the amount of output, variable costs will also decrease.

The graph of variable costs has the following form - fig. 2.

Figure 2. variable cost schedule

On the initial stage the increase in variable costs is directly related to the increase in the number of units of output. Gradually, the growth of variable costs slows down, which is associated with cost savings in mass production.

General costs

Together, the fixed and variable costs of production when added up are total (TC - total costs). This is the sum of items of all costs, both fixed and variable, that an organization spends to produce goods or provide services. Total costs are a variable value and depend on the amount of output (production volumes) and the cost of resources spent on production.

Graphically, the total costs (TC) look like this - fig. 3.

Figure 3. Schedule of fixed, variable and total costs

An example of calculating fixed and variable costs

The Sewing Master JSC company is engaged in tailoring and sale of clothes wholesale and retail. At the beginning of the year, the organization won a tender and signed a long-term contract for a period of 1 year - a large order for tailoring 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.
Sewing shop rental	50 000 rub. per month
Depreciation deductions according to accounting data	48 000 rub. per year
Interest on a loan for the purchase of sewing equipment and necessary materials (fabrics, threads, sewing accessories, etc.)	84 000 rub. per year
Utility bills for electricity, water supply	18 500 rub. per month
The cost of materials for tailoring workwear (fabrics, threads, buttons and other accessories)
Remuneration of workers (working staff of the workshop amounted to 12 people) with an average wages 30 000 rub.	360 000 rub. per month
Remuneration of administrative staff (3 people) with an average salary 45 000 rub.	135 000 rub. per month
sewing equipment cost

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 \u003d 50000 * 12 + 48000 + 84000 + 500000 \u003d 1,232,000 rubles per year.

Let's calculate the average fixed costs:

Variable costs include the cost of raw materials and materials, the wages of employees of the sewing workshop and the payment of utility bills.

VC \u003d 200000 + 360000 + 18500 * 12 \u003d 782,000 rubles.

Calculate average variable costs

We obtain the total costs for the production of all products by summing up the fixed and variable costs:

TC \u003d 1232000 + 782000 \u003d 20,140,00 rubles.

The average total costs are calculated by the formula:

Results

Bearing in mind that the organization has just started its sewing production (rents a workshop, purchases sewing equipment on credit, etc.), the amount of fixed costs at the initial stage of production will be quite significant. Also plays a role and the fact that the volume of production is still low - 5,000 units. Therefore, fixed costs so far prevail over variable ones.

With an increase in production, fixed costs will remain unchanged, but variables will increase.

Analysis and planning

Cost planning (both fixed and variable) allows the organization to rationally and more efficiently use available resources, as well as predict its activities for the future (concerns short term). The analysis is also necessary in order to determine where the most costly items of expenditure are and how you can save on the production of goods.

Savings on fixed and variable costs reduces the cost of production - the organization can install on its products more low price than before, which increases the competitiveness of products in the market and increases the attractiveness in the eyes of consumers (