Self-development 

Technological costs. Types of production costs. Fixed and variable production costs

Production costs- this is a set of expenses that enterprises incur in the process of production and sales of products.

Production costs can be classified according to many criteria. From the firm's perspective, individual production costs are identified. They directly take into account the expenses of the business entity itself. Entrepreneurial firms have different individual production costs. In some cases, industry average and social costs are taken into account. Social costs are understood as the costs of producing a certain type and volume of products from the perspective of the entire national economy.

There are also production costs and circulation costs, which are associated with the phases of capital movement. Production costs include only those costs that are directly related to material creation, to the production of a product. Distribution costs include all costs caused by the sale of manufactured products. They include additional and net distribution costs.

Additional distribution costs are the costs associated with transportation, warehousing and storage of products, their packaging and packaging, and bringing the products to the direct consumer. They increase the final cost of the product.

Advertising and rental expenses retail premises, the costs of maintaining sellers and sales agents, accountants form pure distribution costs, which do not form a new value.

In market conditions, the economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use (economic costs).

From the standpoint of an individual firm, economic costs are the costs that the firm must bear in favor of the supplier of inputs in order to divert them from use in alternative industries. Also, costs can be both external and internal. Costs in monetary form that a company incurs in favor of suppliers of labor services, fuel, raw materials, auxiliary materials, transport and other services are called external, or explicit (actual), costs. In this case, resource suppliers are not the owners of this company. Explicit costs are fully reflected in the accounting records of enterprises, and therefore they are called accounting costs.

At the same time, the company can use its own resources. In this case, costs are also inevitable. The costs of one's own resource and one that is independently used are unpaid, or internal, implicit (implicit) costs. The company considers them as equivalent to the cash payments that would be received for an independently used resource with its most optimal use.

Implicit costs cannot be identified with the so-called sunk costs. Sunk costs are costs that are incurred by the company once and cannot be returned under any circumstances. Sunk costs are not considered alternative costs; they are not taken into account in the company's current costs associated with its production activities.

There is also such a criterion for classifying costs as time intervals; during the second they take place. From this point of view, production costs in the short term are divided into constant and variable, and in the long term all costs are represented by variables.

Fixed costs (TFC) - those actual costs that do not depend on the volume of output. Fixed costs occur even when products are not produced at all. THEY are connected with the very existence of the company, i.e. with expenses for the general maintenance of a factory or plant (payment of rent for land, equipment, depreciation charges for buildings and equipment, insurance premiums, property tax, salaries to senior management personnel, payments on bonds, etc.) In the future, production volumes may change, but fixed costs will remain unchanged. Collectively, fixed costs are the so-called overhead costs.

Variable costs(TVC) - those costs that change with changes in the quantity of products produced. Variable costs include expenses for raw materials, materials, fuel, electricity, payment transport services, payment for the most part labor resources(salary).

They also distinguish between aggregate (total), average and marginal cost.

Cumulative, or total, production costs (Fig. 11.1) consist of the sum of all fixed and variable costs: TC = TFC + TVC.

In addition to total costs, the entrepreneur is interested in average costs, the value of which is always indicated per unit of production. There are average total (ATC), average variable (AVC) and average fixed (AFC) costs.

Average total costs(ATC) is the total cost per unit and is usually used for comparison with price. They are defined as the quotient of total costs divided by the number of units produced:

Average variable costs(AVC) is a measure of the cost of a variable factor per unit of output. They are defined as the quotient of gross variable costs divided by the number of units of production: AVC=TVC/Q.

Average fixed costs(AFC), fig. 11.2 - indicator of fixed costs per unit of output. They are calculated using the formula AFC=TFC/Q.

In the theory of firm costs, an important role belongs to marginal costs (MC) - the costs of producing an additional unit of output in addition to the quantity already produced. MC can be determined for each additional unit of production by attributing changes in the amount of total costs to the number of units of production that caused these changes: MC=ΔTC/ΔQ.

The long-term period in the activity of a company is characterized by the fact that it is able to change the amount of all production factors used, which are variable.

The long-term ATC curve (Fig. 11.3) shows the lowest production costs of any given volume of output, provided that the firm had necessary time to change all its production factors. From the figure it can be seen that the build-up production capacity at the enterprise will be accompanied by a decrease in the average total costs of producing a unit of output until the enterprise reaches the size corresponding to the third option. A further increase in production volumes will be accompanied by an increase in long-term average total costs.

The dynamics of the long-run average total cost curve can be explained using the so-called economies of scale.

As the size of the enterprise grows, a number of factors can be identified that determine the reduction in average production costs, i.e. giving positive economies of scale:

  • labor specialization;
  • specialization of management personnel;
  • efficient use of capital;
  • production of by-products.

Diseconomies of scale mean that over time, expansion of firms can lead to negative economic consequences and, therefore, to increased unit production costs. The main reason for the occurrence of negative economies of scale is associated with certain management difficulties.

In the economic practice of our country, the category “cost” is used to determine the value of production costs. Under cost of production understand the cash current costs of enterprises for its production and sale. Cost shows how much it costs a given enterprise to manufacture and sell products. The cost reflects the level of technology, organization of production and labor at the enterprise, and business results. Its comprehensive analysis enables enterprises to more fully identify unproductive expenses, various types of losses, and find ways to reduce production costs. Cost is a consequence of the economic efficiency of capital investments, implementation new technology and production technologies, equipment modernization. When developing technical measures, it allows you to choose the most profitable, optimal options.

Based on the level and location of cost formation, a distinction is made between individual and industry average costs. Individual cost is the cost of production and sales of products that accumulate at each individual enterprise. Industry average cost is the cost of production and sales of products, which is the average for the industry.

According to the calculation methods, the cost is divided into planned, standard and actual. Under planned cost usually understand the cost determined on the basis of the planned (estimated) calculation of individual costs. The standard cost of a product shows the costs of its production and sale, calculated on the basis of current cost standards in force at the beginning of the reporting period. It is reflected in standard calculations. The actual cost expresses the costs incurred in the reporting period for the production and sale of a certain type of product, i.e. actual resource costs. The actual cost of production of specific products is recorded in reporting estimates.

Based on the degree of completeness of cost accounting, a distinction is made between production and commercial costs. Production cost consists of all costs associated with the manufacture of products. Non-production costs (costs of containers, packaging, delivery of products to the destination, sales costs) are taken into account when determining commercial costs. The sum of production and non-production costs forms the total cost.

The cost corresponds to accounting costs, i.e. does not take into account implicit (imputed) costs.

The cost of products (works, services) of an enterprise includes costs associated with use in the production process natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources and other costs for its production and sale.

Other elements of cost are the following costs and deductions:

  • for preparation and development of production;
  • service related production process;
  • related to production management;
  • to ensure normal working conditions and safety precautions;
  • for payments provided for by labor legislation for unworked time; payment for regular and additional vacations, payment for working time for performing government duties;
  • contributions to state social insurance and pension fund from labor costs included in the cost of production, as well as the employment fund;
  • contributions for compulsory health insurance.

Basic concepts of the topic

Production costs. Distribution costs. Net and additional distribution costs. Opportunity costs. Economic and accounting costs. Explicit and implicit costs. Sunk costs. Fixed and variable costs. Gross, average and marginal costs. Manufacturer's gain. Isocosta. Producer equilibrium. Effect of scale. Positive and negative economies of scale. Long-run average costs. Short-term costs.

Security questions

  1. What is meant by production costs?
  2. How are distribution costs divided?
  3. What is the difference between economic and accounting costs? Explain their purpose.
  4. What are the costs called, the value of which does not depend on the volume of output?
  5. What are variable costs? Give an example of these costs.
  6. Are so-called sunk costs taken into account in current costs?
  7. How are gross (total), average and marginal costs determined and what is their essence?
  8. What is the relationship between marginal cost and marginal productivity (marginal product)?
  9. Why are average and marginal cost curves U-shaped in the short run?
  10. Knowing what costs allows us to determine the amount of gain for the manufacturer (surplus for the manufacturer)?
  11. What is meant by product cost and what types of it are used in domestic business practice?
  12. What costs (explicit or implicit) does the category “cost” correspond to?
  13. What is the name of a straight line that shows all combinations of resources whose use requires the same costs?
  14. What does the descending nature of the isocost mean?
  15. How can we explain the state of equilibrium of the producer?
  16. If the combination of factors applied minimizes costs for a given amount of output, then it will maximize output for a given amount of costs. Explain this with a graph.
  17. What is the name of the line that defines the long-term path of expansion of the company and passes through the tangency points of the isocosts and the corresponding isoquants?
  18. What circumstances cause positive and diseconomies of scale?

Costs(cost) - the cost of everything that the seller has to give up in order to produce the goods.

To carry out its activities, the company incurs certain costs associated with the acquisition of necessary production factors and the sale of manufactured products. The valuation of these costs is the firm's costs. Most economically effective method production and sale of any product is considered to be such that the company’s costs are minimized.

The concept of costs has several meanings.

Classification of costs

  • Individual- costs of the company itself;
  • Public- the total costs of society for the production of a product, including not only purely production, but also all other costs: protection environment, training of qualified personnel, etc.;
  • Production costs- these are costs directly associated with the production of goods and services;
  • Distribution costs- related to the sale of manufactured products.

Classification of distribution costs

  • Additional costs circulation includes the costs of bringing manufactured products to the final consumer (storage, packaging, packing, transportation of products), which increase the final cost of the product.
  • Net distribution costs- these are costs associated exclusively with acts of purchase and sale (payment of sales workers, keeping records of trade operations, advertising costs, etc.), which do not form a new value and are deducted from the cost of the goods.

The essence of costs from the perspective of accounting and economic approaches

  • Accounting costs- This valuation used resources in actual prices of their sale. The costs of an enterprise in accounting and statistical reporting appear in the form of production costs.
  • Economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use. Essentially all costs are opportunity cost. The economist's task is to choose the most optimal option for using resources. Economic costs resource chosen for the production of a product are equal to its cost (value) under the best (of all possible) option for its use.

If an accountant is mainly interested in assessing the company’s past activities, then an economist is also interested in the current and especially projected assessment of the firm’s activities, and in finding the most optimal option for using available resources. Economic costs are usually greater than accounting costs - this is total opportunity costs.

Economic costs, depending on whether the firm pays for the resources used. Explicit and implicit costs

  • External costs (explicit)— these are costs in cash that a company makes in favor of suppliers of labor services, fuel, raw materials, auxiliary materials, transport and other services. In this case, the resource providers are not the owners of the firm. Since such costs are reflected in the balance sheet and report of the company, they are essentially accounting costs.
  • Internal costs (implicit)— these are the costs of your own and independently used resource. The company considers them as the equivalent of those cash payments that would be received for an independently used resource with its most optimal use.

Let's give an example. You are the owner small store, which is located on premises that are your property. If you didn’t have a store, you could rent out this premises for, say, $100 a month. These are internal costs. The example can be continued. When working in your store, you use your own labor, without, of course, receiving any payment for it. With an alternative use of your labor, you would have a certain income.

The natural question is: what keeps you as the owner of this store? Some kind of profit. The minimum wage required to keep someone operating in a given line of business is called normal profit. Uncollected revenue from use own resources and normal profit add up to internal costs. So, from the standpoint of the economic approach, production costs should take into account all costs - both external and internal, including the latter and normal profit.

Implicit costs cannot be identified with the so-called sunk costs. Sunk costs- these are costs that are incurred by the company once and cannot be returned under any circumstances. If, for example, the owner of an enterprise incurs certain monetary expenses to have an inscription made on the wall of this enterprise with its name and type of activity, then when selling such an enterprise, its owner is prepared in advance to incur certain losses associated with the cost of the inscription.

There is also such a criterion for classifying costs as the time intervals during which they occur. The costs that a firm incurs in producing a given volume of output depend not only on the prices of the factors of production used, but also on which production factors are used and in what quantities. Therefore, short- and long-term periods in the company’s activities are distinguished.

The goal of any enterprise is to earn maximum profit, which is calculated as the difference between income and total costs. Therefore, the financial result of a company directly depends on the size of its costs. This article describes the fixed, variable and total costs of production and how they affect the current and future operations of the enterprise.

What are production costs

Production costs refer to the monetary costs of acquiring all the factors used to manufacture a product. Most in an efficient way production is considered to be the one that has the minimum cost of producing a unit of goods.

The relevance of calculating this indicator is associated with the problem of limited resources and alternative use, when the raw materials used can only be used for their intended purpose, and all other ways of their use are excluded. Therefore, at each enterprise, an economist must carefully calculate all types of production costs and be able to choose the optimal combination of factors used so that costs are minimal.

Explicit and implicit costs

Explicit or external costs include expenses incurred by the enterprise at the expense of suppliers of raw materials, fuel and service contractors.

Implicit, or internal, costs of an enterprise are the income lost by the company due to the independent use of its resources. In other words, this is the amount of money that the company could receive if the best way use of the existing resource base. For example, diverting a specific type of material from the production of product A and using it for the production of product B.

This division of costs is associated with different approaches to their calculation.

Methods for calculating costs

In economics, there are two approaches that are used to calculate the amount of production costs:

  1. Accounting - production costs will include only the actual costs of the enterprise: wages, depreciation, social contributions, payments for raw materials and fuel.
  2. Economic - in addition to real costs, production costs include the cost of lost opportunities for optimal use of available resources.

Classification of production costs

There are the following types of production costs:

  1. Fixed costs (FC) are costs, the amount of which does not change in the short term and does not depend on the volume of manufactured products. That is, with an increase or decrease in production, the value of these costs will be the same. Such expenses include administration salaries and premises rental.
  2. Average fixed costs (AFC) are fixed costs, which fall per unit of manufactured products. They are calculated using the formula:
  • SPI = PI: Oh,
    where O is the volume of production output.

    From this formula it follows that average costs depend on the quantity of goods produced. If the company increases production volumes, then overhead costs will correspondingly decrease. This pattern serves as an incentive to expand activities.

3. Variable production costs (VCO) - costs that depend on production volumes and tend to change when decreasing or increasing total number manufactured goods (wages of workers, costs of resources, raw materials, electricity). This means that as the scale of activity increases, variable costs will increase. At first they will increase in proportion to the volume of production. In the next stage, the company will achieve cost savings with more production. And in the third period, due to the need to purchase more raw materials, variable production costs may increase. Examples of this trend are increased transport traffic finished products to the warehouse, payment to suppliers for additional batches of raw materials.

When making calculations, it is very important to distinguish between types of costs in order to calculate the correct cost of production. It should be remembered that variable production costs do not include real estate rental fees, depreciation of fixed assets, and equipment maintenance.

4. Average variable costs (AVC) - the amount of variable costs that an enterprise incurs to produce a unit of goods. This indicator can be calculated by dividing total variable costs by the volume of goods produced:

  • SPrI = Pr: O.

Average variable production costs do not change over a certain range of production volumes, but with a significant increase in the quantity of goods produced, they begin to increase. This is due to the high total costs and their heterogeneous composition.

5. Total costs (TC) - include fixed and variable production costs. They are calculated using the formula:

  • OI = PI + Pri.

That is, you need to look for the reasons for the high indicator of total costs in its components.

6. Average total costs (ATC) - show the total production costs that fall per unit of product:

  • SOI = OI: O = (PI + PrI): O.

The last two indicators increase as production volumes increase.

Types of variable expenses

Variable production costs do not always increase in proportion to the rate of increase in production volume. For example, an enterprise decided to produce more goods and for this introduced night shift. Payment for work at such times is higher, and, as a result, the company will incur additional significant costs.

Therefore, there are several types of variable costs:

  • Proportional - such costs increase at the same rate as the volume of production. For example, with an increase in production by 15%, variable costs will increase by the same amount.
  • Regressive - the growth rate of this type of cost lags behind the increase in product volumes; for example, with an increase in the quantity of manufactured products by 23%, variable costs will increase by only 10%.
  • Progressive - variable costs of this type increase faster than the growth of production volume. For example, an enterprise increased production by 15%, and costs increased by 25%.

Costs in the short term

A short-term period is considered to be a period of time during which one group of production factors is constant and the other is variable. In this case, stable factors include the area of ​​the building, the size of the structures, and the amount of machinery and equipment used. Variable factors consist of raw materials, number of employees.

Costs in the long run

The long-run period is a period of time in which all the production factors used are variable. The fact is that over a long period, any company can change its premises to larger or smaller ones, completely update equipment, reduce or expand the number of enterprises under its control, and adjust the composition of management personnel. That is, in the long term, all costs are considered as variable production costs.

When planning a long-term business, an enterprise must conduct a deep and thorough analysis of all possible costs and draw up the dynamics of future expenses in order to achieve the most efficient production.

Average costs in the long run

An enterprise can organize small, medium and large production. When choosing the scale of activity, a company must take into account key market indicators, projected demand for its products and the cost of the required production capacity.

If a company's product is not in great demand and it is planned to produce a small quantity, in this case it is better to create a small production facility. Average costs will be significantly lower than with large-scale production. If a market assessment shows a high demand for a product, then it is more profitable for the company to organize large production. It will be more profitable and will have the lowest fixed, variable and total costs.

When choosing a more profitable production option, the company must constantly monitor all its costs in order to be able to change resources in a timely manner.

At the center of the classification of costs is the relationship between production volume and costs, the price of a given type of goods. Costs are divided into independent and dependent on the volume of products produced.

Fixed costs do not depend on the volume of production; they exist even at zero production volume. These are the previous obligations of the enterprise (interest on loans, etc.), taxes, depreciation, security payments, rent, equipment maintenance costs with zero production volume, salaries of management personnel, etc. The concept of fixed costs can be illustrated in Fig. 1.

Rice. 1. Fixed costs Chuev I.N., Chechevitsyna L.N. Enterprise economics. - M.: ITK Dashkov and K - 2006. - 225 p.

Let us plot the quantity of output (Q) on the x-axis, and costs (C) on the y-axis. Then the fixed cost line will be a constant parallel to the x-axis. It is designated FC. Since with an increase in production volume, fixed costs per unit of output decrease, the average fixed cost (AFC) curve has a negative slope (Fig. 2). Average fixed costs are calculated using the formula: AFC = FС/Q.

They depend on the quantity of products produced and consist of the costs of raw materials, materials, wages to workers, etc.

As optimal output volumes are achieved (at point Q1), the growth rate of variable costs decreases. However, further expansion of production leads to accelerated growth of variable costs (Fig. 3).

Rice. 3.

The sum of fixed and variable costs forms gross costs- amount cash expenses for the production of a certain type of product.

The difference between fixed and variable costs is essential for every businessman. Variable costs are costs that an entrepreneur can control, the value of which can be changed over a short period of time by changing the volume of production. On the other hand, fixed costs are obviously under the control of the company's administration. Such costs are mandatory and must be paid regardless of the volume of production 11 See: McConnell K. R. Economics: principles, problems, policies / McConnell K. R., Brew L. V. In 2 volumes / Translated from English . 11th ed. - T. 2. - M.: Republic, - 1992, p. 51..

To measure the cost of producing a unit of output, the categories of average, average fixed and average variable costs are used. Average costs equal to the quotient of total costs divided by the quantity of products produced. determined by dividing fixed costs by the number of products produced.

Rice. 2.

Determined by dividing variable costs by production volume:

АВС = VC/Q

When the optimal production size is achieved, average variable costs become minimal (Fig. 4).

Rice. 4.

Average variable costs play important role in the analysis of the economic state of the company: its equilibrium position and development prospects - expansion, reduction in production or exit from the industry.

General costs - the totality of a firm's fixed and variable costs ( TC = FC + VC).

Graphically, total costs are depicted as a result of the summation of fixed and variable cost curves (Fig. 5).

Average total costs are the quotient of total costs (TC) divided by production volume (Q). (Sometimes the average total costs of ATS in the economic literature are denoted as AC):

AC (ATC) = TC/Q.

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

Rice. 5.

Graphically, average costs are depicted by summing the curves of average fixed and average variable costs and have a Y-shape (Fig. 6).

Rice. 6.

The role of average costs in a company's activities is determined by the fact that their comparison with the price allows one to determine the amount of profit, which is calculated as the difference between total revenue and total costs. This difference serves as a criterion for choosing the right strategy and tactics for the company.

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

Marginal cost - This is the increment in the total cost of producing an additional unit of output.

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

Marginal costs are obtained as the difference between production costs n + 1 units and production costs n units of product.

Since when output changes, fixed costs FV do not change, the change in marginal costs is determined only by the change in variable costs as a result of the release of an additional unit of output.

Marginal costs are shown graphically as follows(Fig. 7).

Rice. 7. Marginal and average costs Chuev I.N., Chechevitsyna L.N. Enterprise economics. - M.: ITK Dashkov and K - 2006. - 228 p.

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

The sizes of marginal and average costs have exclusively important, since the company’s choice of production volume primarily depends on them.

MS do not depend on FC , since FC do not depend on the volume of production, and MS are incremental costs.

As long as MC is less than AC, the average cost curve has a negative slope. This means that producing an additional unit of output reduces average cost.

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

5. When MC becomes larger than AC, the average cost curve goes up, indicating an increase in average costs as a result of producing an additional unit of output.

6. The MC curve intersects the ABC curve and the AC curve at their points minimum values(Fig. 7).

Under average refers to the plant’s costs for the production and sale of a unit of goods. Highlight:

* average fixed costs A.F.C., which are calculated by dividing the firm's fixed costs by production volume;

* average variable costs AVC, calculated by dividing variable costs by production volume;

* average gross costs or the total cost per unit of a vehicle product, which are determined as the sum of average variable and average fixed costs or as the quotient of dividing gross costs by output volume (their graphical expression is in Appendix 3).

* according to the methods of accounting and grouping costs, they are divided into simple(raw materials, materials, wages, wear and tear, energy, etc.) and complex, those. collected into groups either by functional role in the production process or by location of costs (shop expenses, factory overhead, etc.);

* the terms of use in production differ from daily, or current, costs and one-time, one-time costs incurred less than once a month and for economic analysis costs, marginal costs are used.

Average total cost (ATC) is the total cost per unit of output and is commonly used for comparison with price. They are defined as the quotient of total costs divided by the number of units produced:

TC = ATC / Q (2)

(AVC) is a measure of the cost of a variable factor per unit of output. They are defined as the quotient of gross variable costs divided by the number of units of production and are calculated using the formula:

AVC = VC / Q. (3)

Average fixed cost (AFC) is a measure of fixed costs per unit of output. They are calculated using the formula:

AFC=FC/Q. (4)

Graphic dependences of quantities various types average costs based on production volume are presented in Fig. 2.

Rice. 2

From the data analysis in Fig. 2 we can draw conclusions:

1) the AFC value, which is the ratio of the constant FC to the variable Q (4), is a hyperbola on the graph, i.e. with an increase in production volume, the share of average fixed costs per unit of output decreases;

2) the AVC value is the ratio of two variables: VC and Q (3). However, variable costs (VC) are almost directly proportional to product output (since the more products planned to be produced, the higher the costs will be). Therefore, the dependence of AVC on Q (volume of products produced) looks like an almost straight line parallel to the x-axis;

3) ATC, which is the sum of AFC + AVC, looks like a hyperbolic curve on the graph, located almost parallel to the AFC line. Thus, as with AFC, the share of average total cost (ATC) per unit of output decreases as production volume increases.

Average total costs first decrease and then begin to increase. Moreover, the ATC and AVC curves are getting closer. This occurs because average fixed costs over the short run decrease as output increases. Consequently, the difference in the height of the ATC and AVC curves at a certain volume of production depends on the value of AFC.

In the specific practice of using cost calculation to analyze the activities of enterprises in Russia and in Western countries there are both similarities and differences. The category is widely used in Russia cost price, representing the total costs of production and sales of products. Theoretically, the cost should include standard production costs, but in practice it includes excess consumption of raw materials, materials, etc. Cost is determined based on addition economic elements(costs of the same economic purpose) or by summing up costing items that characterize the direct directions of certain expenses.

Both in the CIS and in Western countries, to calculate costs, a classification of direct and indirect costs (expenses) is used. Direct costs- These are the costs directly associated with the creation of a unit of goods. Indirect costs necessary for the general implementation of the production process of this type of product at the enterprise. General approach does not exclude differences in the specific classification of some articles.

Due to the volume of output, costs in the short term are divided into fixed and variable.

Constants do not depend on the volume of output (FC). These include: depreciation costs, wages for employees (as opposed to workers), advertising, rent, electricity bills, etc.

The variables depend on the volume of output (VC). For example, costs for materials, wages of main production workers, and others.

Fixed costs (costs) exist even with zero output (therefore they are never equal to zero). For example, regardless of whether the product is produced or not. You still need to pay rent for the premises. On the graph of the dependence of the value of costs (C) on the volume of production (Q), fixed costs (FC) look like a horizontal straight line, since they are not related to the manufactured products (Fig. 1).

Since variable costs (VC) depend on output, the more products are planned to be produced, the more costs need to be incurred for this. If nothing is produced, then there are no costs. Thus, the value of variable costs is in direct positive dependence on the volume of output and on the graph (see Fig. 1) represents a curve emerging from the origin.

The sum of fixed and variable costs is equal to total (gross) costs:

TC=FC+VC.(1)

Based on the above formula, on the graph the total cost (TC) curve is plotted parallel to the variable cost curve, however, it does not come from zero, but from a point on the y-axis. the corresponding amount of fixed costs. We can also conclude that as production volume increases, total costs also increase proportionally (Fig. 1).

All types of costs considered (FC, VC and TC) relate to the entire output.

Rice. 1 Dependence of total costs (TC) on variable (VC) and fixed (FC).

Any business involves costs. If they are not there, then there is no product supplied to the market. To produce something, you need to spend money on something. Of course, the lower the costs, the more profitable the business.

However, following this simple rule requires the entrepreneur to take into account large number nuances reflecting the variety of factors influencing the success of the company. What are the most noteworthy aspects that reveal the nature and types of production costs? What does business efficiency depend on?

A little theory

Production costs, according to a common interpretation among Russian economists, are the costs of an enterprise associated with the acquisition of so-called “factors of production” (resources without which a product cannot be produced). The lower they are, the more economically profitable the business is.

Production costs are measured, as a rule, in relation to the total costs of the enterprise. In particular, a separate class expenses may be those associated with the sale of manufactured products. However, everything depends on the methodology used in classifying costs. What are the options here? Among the most common in the Russian marketing school are two: the “accounting” type methodology, and the one called “economic”.

According to the first approach, production costs are the total set of all actual expenses associated with the business (purchase of raw materials, rental of premises, payment utilities, personnel compensation, etc.). The “economic” methodology also involves the inclusion of those costs, the value of which is directly related to the company’s lost profit.

In accordance with popular theories adhered to by Russian marketers, production costs are divided into fixed and variable. Those that belong to the first type, as a rule, do not change (if we talk about short-term time periods) depending on the growth or reduction in the rate of production of goods.

Fixed costs

Fixed production costs are, most often, such expense items as rent of premises, remuneration of administrative personnel (managers, executives), obligations to pay certain types of contributions to social funds. If they are presented in the form of a graph, it will be a curve that is directly dependent on the volume of production.

As a rule, enterprise economists calculate average production costs from those that are considered constant. They are calculated based on the volume of costs per unit of manufactured goods. Typically, as the volume of goods produced increases, the average cost “schedule” decreases. That is, as a rule, the greater the productivity of the factory, the cheaper the unit product.

Variable costs

The enterprise's production costs related to variables, in turn, are very susceptible to changes in the volume of output. These include the costs of purchasing raw materials, paying for electricity, and compensating personnel at the specialist level. This is understandable: more material is required, energy is wasted, new personnel are needed. A graph showing the dynamics of variable costs is usually not constant. If a company is just starting to produce something, then these costs usually grow more rapidly in comparison with the rate of increase in production.

But as soon as the factory reaches a sufficiently intensive turnover, then variable costs, as a rule, do not grow so actively. As in the case of fixed costs, for the second type of costs it is often calculated average- again, in relation to the output of a unit of production. The combination of fixed and variable costs is the total cost of production. Usually they are simply added together mathematically when analyzing a company's economic performance.

Costs and depreciation

Phenomena such as depreciation and the closely related term “wear and tear” are directly related to production costs. By what mechanisms?

First, let's define what wear is. This, according to the interpretation widespread among Russian economists, is a decrease in the value of production resources. Wear and tear can be physical (when, for example, a machine or other equipment simply breaks down or cannot withstand the previous rate of production of goods), or moral (if the means of production used by the enterprise, say, are much inferior in efficiency to those used in competing factories ).

A number of modern economists agree that obsolescence is a constant cost of production. Physical - variables. The costs associated with maintaining the volume of production of goods subject to wear and tear of equipment form the same depreciation charges.

As a rule, this is associated with the purchase of new equipment or investments in the repair of current equipment. Sometimes - with change technological processes(for example, if a machine producing spokes for wheels breaks down at a bicycle factory, their production may be outsourced temporarily or on an indefinite basis, which, as a rule, increases the cost of producing finished products).

Thus, timely modernization and purchase of high-quality equipment is a factor that significantly influences the reduction of production costs. Newer and modern technology in many cases involves lower depreciation costs. Sometimes the costs associated with equipment wear and tear are also influenced by the qualifications of the personnel.

As a rule, more experienced craftsmen handle equipment more carefully than beginners, and therefore it may make sense to spend money on inviting expensive, highly qualified specialists (or invest in training young ones). These costs may be lower than investments in depreciation of equipment subject to intensive use by inexperienced beginners.