How to calculate the costs of a firm. Formula. Example of calculation in Excel. Fixed costs. Definition

Every organization strives to maximize profits. Any production bears the cost of purchasing factors of production. At the same time, the organization seeks to achieve such a level that a given volume of products is provided least cost... The firm cannot influence the prices of resources. But, knowing the dependence of production volumes on the number of variable costs, you can calculate the costs. Cost formulas will be presented below.

Types of costs

From the point of view of the organization, expenses are divided into the following groups:

individual (costs of a specific enterprise) and social (costs of manufacturing a specific type of product, incurred by the entire economy);
alternative;
production;
general.

The second group is additionally divided into several elements.

Total expenses

Before studying how costs are calculated, cost formulas, let's look at the basic terms.

Total Cost (TC) is the total cost of producing a specific volume of items. IN short term a number of factors (for example, capital) do not change, part of the costs does not depend on the volume of output. This is called total fixed cost (TFC). The amount of expense that changes with output is called total variable cost (TVC). How to calculate total costs? Formula:

Fixed costs, the calculation formula of which will be presented below, include: interest on loans, depreciation, insurance premiums, rent, salary. Even if the organization is not working, it must pay rent and loan debt. Variable costs include salaries, material costs, electricity bills, etc.

With an increase in output volumes, variable production costs, the calculation formulas for which were presented earlier:

grow proportionally;
slow down growth when reaching the maximum profitable volume of production;
resume growth due to violation optimal sizes enterprises.

Average expenses

In an effort to maximize profits, an organization seeks to reduce unit costs. This ratio shows such a parameter as (ATC) average cost. Formula:

ATC = TC \ Q.

ATC = AFC + AVC.

Marginal costs

The change in the total amount of costs with an increase or decrease in the volume of production per unit shows the marginal cost. Formula:

From an economic point of view, marginal cost is very important in determining the behavior of an organization in a market environment.

Interconnection

The marginal cost should be less than the overall average (per unit). Failure to comply with this ratio indicates a violation of the optimal size of the enterprise. Average costs will change in the same way as the margins. It is impossible to constantly increase the volume of production. This is the law of diminishing returns. At a certain level, the variable costs, the calculation formula for which was presented earlier, will reach their maximum. After this critical level, an increase in production volumes even by one unit will lead to an increase in all types of costs.

Example

Having information about the volume of production and the level of fixed costs, it is possible to calculate all existing species costs.

Release, Q, pcs.	Total costs, TC in rubles

Without being involved in production, the organization incurs fixed costs at the level of 60 thousand rubles.

Variable costs are calculated using the formula: VC = TC - FC.

If the organization is not engaged in production, the sum of variable costs will be zero. With an increase in production for 1 piece, VC will be: 130 - 60 = 70 rubles, etc.

Marginal costs are calculated using the formula:

MC = ΔTC / 1 = ΔTC = TC (n) - TC (n-1).

The denominator of the fraction is 1, since each time the volume of production increases by 1 piece. All other costs are calculated using standard formulas.

Opportunity costs

Accounting costs are the cost of the resources used in their purchase prices. They are also called explicit. The amount of these costs can always be calculated and justified by a specific document. These include:

salary;
equipment rental costs;
fare;
payment for materials, services of banks, etc.

Economic costs are the value of other assets that can be obtained by alternative use of resources. Economic costs = Explicit + Implicit costs. These two types of expenses most often do not coincide.

Implicit costs are payments that a firm could receive if its resources were used more profitably. If they were bought on competitive market, then their price would be the best of the alternative. But pricing is influenced by the state and market imperfections. Therefore, the market price may not reflect the real cost of resources and may be higher or lower than the opportunity cost. Let's take a closer look at the economic costs, cost formulas.

Examples of

An entrepreneur, working for himself, receives a certain profit from the activity. If the sum of all expenses incurred is higher than the income received, then the entrepreneur ultimately suffers a net loss. It, together with the net profit, is recorded in the documents and refers to explicit costs. If an entrepreneur worked from home and received an income that would exceed his net profit, then the difference between these values would be an implicit cost. For example, an entrepreneur receives a net profit of 15 thousand rubles, and if he worked for hire, he would have 20 000. In this case, there are implicit costs. Cost formulas:

NI = Salary - Net profit = 20 - 15 = 5 thousand rubles.

Another example: an organization uses in its activities the premises that it owns. In this case, the amount of utility costs (for example, 2 thousand rubles) is an obvious expense. If the organization rented this premises for rent, then it would receive an income of 2.5 thousand rubles. It is clear that in this case the company would also pay utility bills on a monthly basis. But she would also receive a net income. There are implicit costs involved. Cost formulas:

NI = Rent - Utility = 2.5 - 2 = 0.5 thousand rubles.

Recoverable and sunk costs

The fees for an organization to enter and exit a market are called sunk costs. The costs of registering an enterprise, obtaining a license, payment advertising campaign no one will refund even if the company ceases to operate. In a narrower sense of the word, sunk costs include the cost of resources that cannot be used in alternative directions, for example, the purchase of specialized equipment. This category of expenses does not belong to economic costs and does not affect Current state firms.

Costs and price

If the average costs of the organization are equal market price, then the firm receives zero profit. If favorable conditions increase the price, then the organization makes a profit. If the price corresponds to the minimum average cost, then the question arises about the feasibility of production. If the price does not cover even the minimum of variable costs, then the losses from the liquidation of the firm will be less than from its functioning.

International Labor Distribution (MRI)

The world economy is based on MRI - the specialization of countries in the manufacture of certain types of goods. This is the basis for any kind of cooperation between all states of the world. The essence of MRI is manifested in its dismemberment and unification.

One manufacturing process cannot be divided into several separate ones. At the same time, such a division will allow to unite separate industries and territorial complexes, to establish interrelation between countries. This is the essence of MRI. It is based on the economically advantageous specialization of individual countries in the manufacture of certain types of goods and their exchange in quantitative and qualitative proportions.

Development factors

The following factors are driving countries to participate in MRI:

Volume domestic market... Large countries have more opportunities to find the necessary factors of production and less need to participate in international specialization. At the same time, market relations are developing, import purchases are compensated by export specialization.
The less the state's potential, the greater the need to participate in MRI.
The high provision of the country with mono-resources (for example, oil) and the low level of provision of minerals encourage active participation in MRI.
The greater the share of basic industries in the structure of the economy, the less the need for MRI.

Each participant finds economic benefits in the process itself.

54. Average fixed (AFC), variable (AVC) and total (ATC) costs

The study of average costs is a powerful tool in economic analysis.

Average fixed costs - the costs of a constant resource, with which, on average, a unit of production is produced. Average fixed costs are determined using the following formula:

AFC = TFC / Q,

where AFC is the average fixed costs; TFC - fixed costs; Q is the amount of production.

There is an inverse relationship between the average fixed costs and the average product for a constant resource:

AFC = P K / A x P K

where Р k is the price of a unit of a permanent resource; A x P k - the average product for a constant resource.

AFC = TFC / Q;

TFC = PK x K,

where K is the amount of a permanent resource;

A x P K x t = Q / K

AFC = TFC / Q = (P K x K) / Q = PK / (A x PK)

The average fixed cost graph is a parabola that asymptotically approaches the abscissa and ordinate axes. As the volume of production increases, the average fixed costs decrease, which serves as a powerful incentive for the firm to increase the volume of production. Average variable costs - the costs of a variable resource with which a unit of output is produced on average. Average variable costs are determined by the formula:

AVC = TVC / Q

There is also an inverse relationship between the average variable costs and the average product for a variable resource:

AVC = P L / (A x P L)

where A x P L is the average product for a variable resource; P L is the unit price of a variable resource.

AVC = TVC / Q;

TVC = P L x L,

where L is the amount of variable resource.

A x P L = Q / L

AVC = TVC / Q = (P L x L) / Q = P L / (A x P L)

The change in average variable costs is due to an increase or decrease in the return on a variable resource. If A X P L grow AVC - fall; if A X P L decrease, AVC - increase Therefore, the graph of average variable costs first decreases and then increases, reaching a minimum at the point corresponding to the minimum AP L.

Average total (total) costs - the costs of variable and constant resources, with which, on average, a unit of production is produced.

Average total costs are determined using the formula:

ATC = TC / Q

where ATC is the average total cost; ТС - gross costs; Q is the amount of production.

TC = TFC + TVC,

Consequently,

ATC = TC / Q = (TFC + TVC) / Q = (TFC / Q) + (TVC / Q) = = AFC + AVC

By comparing the value of the average total costs with the price per unit of output, the entrepreneur can estimate his profit from each product released.

(Materials are given on the basis of: E. A. Tatarnikov, N. A. Bogatyrev, O. Yu. Butov. Microeconomics. Answers to exam questions: Tutorial for universities. - M .: Publishing house "Exam", 2005. ISBN 5-472-00856-5)

The production costs of an enterprise can be divided into two categories: variable and fixed costs. Variable costs depend on changes in the volume of production, while fixed costs remain fixed. Understanding the principle of classifying costs into fixed and variable is the first step to managing costs and improving production efficiency. Knowledge of calculation methods variable costs will help you reduce your unit cost, making your business more profitable.

Steps

Calculating variable costs

Classify costs into fixed and variable. Fixed costs are those costs that remain unchanged when the volume of production changes. For example, this could include the rent and salary of the management personnel. Whether you produce 1 unit of production per month or 10,000 units, these costs will remain approximately the same. Variable costs change with changes in production. For example, these include the cost of raw materials, packaging materials, shipping costs and wages production workers. The more products you produce, the higher your variable costs will be.

Add together all the variable costs for the time period in question. Having identified all the variable costs, calculate their total value for the analyzed period of time. For example, your manufacturing operations are fairly simple and involve only three variable costs: raw materials, packaging and shipping costs, and workers' wages. The sum of all these costs will represent the total variable costs.

Divide the total variable costs by the volume of production. If you divide the total amount of variable costs by the volume of production for the analyzed period of time, you will find out the value of variable costs per unit of output. The calculation can be presented as follows: v = V Q (\ displaystyle v = (\ frac (V) (Q))) where v is the variable cost per unit of output, V is the total variable cost, and Q is the volume of production. For example, if in the above example, the annual production is 500,000 units, then the variable costs per unit of output would be as follows: 1550000 500000 (\ displaystyle (\ frac (1550000) (500000))), or 3, 10 (\ displaystyle 3,10) ruble.

Application of the minimax calculation method

Identify the combined costs. Sometimes some costs cannot be clearly attributed to variable or fixed costs. These costs may vary depending on the volume of production, but also be present when production is at a standstill or there is no sale. These costs are called combined costs. They can be broken down into fixed and variable components in order to more accurately determine the amount of fixed and variable costs.

Estimate costs according to the level of production activity. You can use the minimax method to split the combined costs into AC and DC components. This method estimates the combined costs by month with the highest and lowest production volumes, and then compares them to identify the variable cost component. To begin the calculation, you must first identify the months with the highest and lowest production activity (production volume). For each month in question, record production activity as a measurable metric (such as machine-hours spent) and the corresponding combined cost.
- Let's say that your company uses an installation in production waterjet cutting for cutting metal parts. For this reason, your company incurs variable costs of water for production, which depend on its volume. However, you also have constant water costs associated with maintaining your business (drinking, utilities, and so on). In general, your company's water costs are combined.
- Suppose that your water bill was RUB 9,000 in the highest production month and that you spent 60,000 machine-hours on production. And in the month with the lowest production volume, the water bill was 8,000 rubles, while 50,000 machine-hours were spent.
Calculate the variable cost per unit of production (VCR). Find the difference between the two values of both indicators (costs and production) and determine the value of variable costs per unit of production. It is calculated as follows: V C R = C - c P - p (\ displaystyle VCR = (\ frac (C-c) (P-p))) where C and c are costs per month with high and low production levels, and P and p are the corresponding levels of production activity.

Determine the total variable costs. The value calculated above can be used to determine the variable portion of the combined cost. Multiply the variable costs per unit of production by the corresponding level of production activity. In this example, the calculation will be as follows: 0.10 × 50000 (\ displaystyle 0.10 \ times 50,000), or 5000 (\ displaystyle 5000) rubles per month with the lowest production volume, and 0.10 × 60000 (\ displaystyle 0.10 \ times 60000), or 6000 (\ displaystyle 6000) rubles per month with the highest production volume. This will give you the total variable water costs for each of the months in question. Then their value can be subtracted from the total combined costs and get the amount of fixed costs for water, which in either case will amount to 3,000 rubles.

Using variable cost information in practice

Estimate trends in variable costs. In most cases, increasing production will make each additional unit produced more profitable. This is because fixed costs are spread over more items. For example, if a business that produced 500,000 units of products spent RUB 50,000 on rent, these costs in the cost of each unit of production were RUB 0.10. If the volume of production doubles, then the rental costs per unit of production will already amount to 0.05 rubles, which will make it possible to get more profit from the sale of each unit of goods. That is, as sales proceeds increase, the cost of production also grows, but at a slower pace (ideally, in the cost of a unit of output, variable costs per unit should remain unchanged, and a component of fixed costs per unit of output should fall).

Use the percentage of variable costs in the cost price to assess the risk. If you calculate the percentage of variable costs in the unit cost, you can determine the proportional relationship between variable and fixed costs. The calculation is made by dividing the variable costs per unit of production by the unit cost according to the formula: v v + f (\ displaystyle (\ frac (v) (v + f))), where v and f are, respectively, variable and fixed costs per unit of output. For example, if the fixed costs per unit of product are 0.10 rubles, and the variables are 0.40 rubles (with a total cost of 0.50 rubles), then 80% of the cost is variable costs ( 0.40 / 0.50 = 0.8 (\ displaystyle 0.40 / 0.50 = 0.8)). As an outside investor in a company, you can use this information to assess the potential risk to the company's profitability.

Spend comparative analysis with companies in the same industry. First, calculate the variable cost per unit for your company. Then collect data on the value of this indicator from companies in the same industry. This will give you a starting point for assessing the performance of your company. Higher variable costs per unit of output may indicate that a company is less efficient than others; while a lower value of this indicator can be considered a competitive advantage.

The value of variable costs per unit of output above the industry average indicates that the company spends more funds and resources (labor, materials, utilities) on production than its competitors. This may indicate its low efficiency or the use of too expensive resources in production. In any case, it will not be as profitable as its competitors unless it cuts costs or increases prices.
On the other hand, a company that is able to produce the same goods at a lower cost realizes a competitive advantage in making more profits from a fixed market price.
This competitive advantage can be based on the use of cheaper materials, cheaper labor, or more efficient production facilities.
For example, a company that purchases cotton at a lower price than other competitors may produce shirts at lower variable costs and charge lower prices for the product.
Public companies publish their reports on their websites, as well as on the websites of exchanges where their securities are traded. Information about their variable costs can be obtained through the analysis of "Reports on financial results"these companies.

Conduct a break-even analysis. Variable costs (if known) in combination with fixed costs can be used to calculate the break-even point for a new production project. The analyst is able to draw a graph of the dependence of fixed and variable costs on production volumes. With its help, he will be able to determine the most profitable level of production.

2.3.1. Production costs in a market economy.

Production costs - it is the cash cost of purchasing the applied factors of production. Most cost effective method production is considered to be such that minimizes production costs. Production costs are measured in terms of value based on the costs incurred.

Production costs - costs that are directly related to the production of goods.

Treatment costs - costs associated with the sale of manufactured products.

The economic essence of costs is based on the problem of limited resources and alternative use, i.e. the use of resources in this production excludes the possibility of using it for other purposes.

The task of economists is to choose the most optimal option for using production factors and minimize costs.

Internal (implicit) costs - These are monetary incomes donated by the firm independently using its own resources, i.e. these are the incomes that could be received by the firm for independently used resources at the best of possible ways their application. Opportunity costs missed opportunities - the amount of money that is needed to divert a particular resource from the production of good B and use it to produce good A.

Thus, the costs of monetary form that the company has carried out in favor of suppliers (labor, services, fuel, raw materials) is called external (explicit) costs.

Dividing costs into explicit and implicit there are two approaches to understanding the nature of costs.

1. Accounting approach: production costs should include all real, actual costs in monetary form (wages, rent, opportunity costs, raw materials, fuel, depreciation, social deductions).

2. An economic approach: production costs should include not only the actual costs in cash, but also unpaid costs; associated with a missed opportunity to make the best use of these resources.

Short term(SR) - the length of time during which some factors of production are constant, while others are variable.

Constant factors are the overall size of buildings, structures, the number of machinery and equipment, the number of firms that operate in the industry. Therefore, the possibility of free access for firms in the industry in the short term is limited. Variables are raw materials, number of workers.

Long term(LR) - the length of time during which all factors of production are variable. Those. during this period, you can change the size of buildings, equipment, the number of firms. During this period, the company can change all production parameters.

Cost classification

Fixed costs (FC) - costs, the value of which in the short run does not change with an increase or decrease in the volume of production, i.e. they do not depend on the volume of production.

Example: building rent, equipment maintenance, administration salary.

С - the sum of costs.

The fixed cost graph is a straight line parallel to the OX axis.

Average fixed costs (A F C) – fixed costs that fall on a unit of output and is determined by the formula: AFC = FC/ Q

As Q increases, they decrease. This is called overhead allocation. They serve as an incentive for the firm to increase production.

The average fixed cost graph is a diminishing curve. with an increase in the volume of production, the total revenue grows, then the average fixed costs represent an ever smaller amount that falls on a unit of products.

Variable costs (VC) - costs, the value of which changes depending on the increase or decrease in the volume of production, i.e. they depend on the volume of production.

Example: costs of raw materials, electricity, auxiliary materials, wages (workers). Most of the costs are associated with the use of capital.

The graph is a curve proportional to the volume of production, which has an increasing character. But her character can change. Initial period, variable costs grow at a higher rate than manufactured products. As the optimum production size (Q 1) is reached, there is a relative savings in VC.

Average variable costs (AVC) – the volume of variable costs per unit of output. They are determined by the following formula: by dividing VC by the volume of production: AVC = VC / Q. At first the curve falls, then it is horizontal and rises sharply.

A graph is a curve that does not start at the origin. The general character of the curve is ascending. The technologically optimal release size is achieved when AVCs become minimal (i.e., Q - 1).

Total costs (TC or C) - the set of fixed and variable costs of the firm, in connection with the production of products in the short run. They are determined by the formula: TC = FC + VC

Another formula (function of volume production products): ТС = f (Q).

Depreciation and amortization

Wear- this is a gradual loss of their value by capital resources.

Physical deterioration- loss of consumer qualities by means of labor, i.e. technical and production properties.

The decrease in the value of capital goods may not be associated with the loss of their consumer qualities, then they talk about obsolescence. It is due to an increase in the efficiency of the production of capital goods, i.e. the emergence of similar, but cheaper new means of labor that perform similar functions, but more perfect.

Obsolescence is a consequence of scientific and technological progress, but for the company this results in an increase in costs. Obsolescence refers to the change in fixed costs. Physical wear and tear - to variable costs. Capital goods last more than one year. Their cost is carried over to finished products gradually as it wears out - this is called depreciation. Part of the proceeds for amortization is generated in the amortization fund.

Depreciation deductions:

Reflect an estimate of the value of the depreciation of capital resources, i.e. are one of the cost items;

Serves as a source of reproduction of capital goods.

The state legislates depreciation rates, i.e. the percentage of the value of capital goods, by which they are considered to be worn out in a year. It shows how many years the cost of fixed assets should be reimbursed.

Average total costs (ATC) - the sum of the total costs that fall on a unit of production:

ATC = TC / Q = (FC + VC) / Q = (FC / Q) + (VC / Q)

The curve is V-shaped. The volume of production corresponding to the minimum average total cost is called the point of technological optimism.

Marginal cost (MC) - an increase in total costs caused by an increase in production for the next unit of production.

Determined by the following formula: MS = ∆TC / ∆Q.

It can be seen that fixed costs do not affect the value of the MC. And MC depends on the increment in VC associated with an increase or decrease in production (Q).

Marginal cost measures how much it will cost a firm to increase its output per unit. They decisively influence the choice of the volume of production by the firm, since this is precisely the metric that the firm can influence.

The graph is similar to AVC. The MC curve intersects the ATC curve at a point corresponding to minimum value total costs.

In the short term, the costs of the firm are fixed and variable. This follows from the fact that the production capacity of the company remains unchanged and the dynamics of indicators is determined by the growth of equipment utilization.

Based on this graph, you can build a new graph. Which allows you to visually represent the capabilities of the company, maximize profits and view the boundaries of the existence of the company in general.

For a firm's decision-making, the most important characteristic is the average values, the average fixed costs fall as the volume of production increases.

Therefore, the dependence of variable costs on the production growth function is considered.

At the first stage, the average variable costs decrease and then begin to grow under the influence of economies of scale. In this period, it is necessary to determine the production breakeven point (TB).

TB is the level of the physical volume of sales over the estimated period of time, at which the proceeds from the sale of products coincide with the production costs.

Point A - TB, in which revenue (TR) = TC

Limitations to be observed when calculating TB

1. The volume of production is equal to the volume of sales.

2. Fixed costs are the same for any volume of production.

3. Variable costs vary in proportion to the volume of production.

4. The price does not change during the period for which the TB is determined.

5. The unit price and the resource unit cost remain constant.

The law of diminishing marginal returns is not absolute, but relative in nature and it acts only in the short term, when at least one of the factors of production remains unchanged.

Law: with an increase in the use of someone's factor of production, while the others remain unchanged, sooner or later a point is reached, from which the additional use of variable factors leads to a decrease in the increase in production.

The operation of this law presupposes the invariability of the state of technically and technologically production. And therefore, technological progress can change the boundaries of this law.

The long-term period is characterized by the fact that the firm is able to change all the factors of production used. In this period variable character of all applied factors of production allows the company to use the most optimal options for their combination. This will affect the value and dynamics of average costs (unit costs). If the company decides to increase the volume of production, but by initial stage(ATC) will first decrease, and then, when more and more capacities are involved in production, they will begin to increase.

The graph of long-term total costs shows seven different options (1-7) of the ATC behavior in short-term periods, since the long-term period is the sum of the short-term periods.

The long-run cost curve consists of options called stages of growth. In each stage (I - III) the firm operates in the short term. The dynamics of the long-run cost curve can be explained using economies of scale. Changes by the firm of the parameters of its activities, i.e. the transition from one variant of the size of the enterprise to another is called change in the scale of production.

I - in this time interval, long-term costs decrease with an increase in the volume of output, i.e. economies of scale take place - positive economies of scale (from 0 to Q 1).

II - (this is from Q 1 to Q 2), at this time interval of production, the long-term ATS does not seem to react to an increase in the volume of production, i.e. remains unchanged. And the firm will have a constant effect of the scale of production (constant returns to scale).

III - long-term ATC with an increase in the volume of output grow and there is damage from an increase in the scale of production or negative economies of scale(from Q 2 to Q 3).

3. IN general view profit is defined as the difference between total revenue and total costs for certain period time:

SP = TR –TS

TR ( total revenue) - the amount of cash receipts by the company from the sale a certain amount product:

TR = P* Q

AR(average revenue) is the sum of cash receipts per unit of product sold.

Average revenue equals market price:

AR = TR/ Q = PQ/ Q = P

MR(marginal revenue) is the increment in revenue that arises from the sale of the next unit of production. In condition perfect competition it is equal to the market price:

MR = ∆ TR/∆ Q = ∆(PQ) /∆ Q =∆ P

In connection with the classification of costs into external (explicit) and internal (implicit), different concepts of profit are assumed.

Explicit costs (external) are determined by the sum of the enterprise's expenses to pay for the purchased factors of production from outside.

Implicit costs (internal) are determined by the cost of resources owned by this enterprise.

If external costs are subtracted from total revenue, we get accounting profit - takes into account external costs, but does not take into account internal ones.

If internal costs are subtracted from accounting profit, we get economic profit.

Unlike accounting, economic profit takes into account both external and internal costs.

Normal profit appears in the case when the total revenue of the enterprise or firm is equal to the total costs, calculated as alternative. The minimum level of profitability is when it is profitable for an entrepreneur to run a business. "0" - zero economic profit.

Economic profit(pure) - its presence means that on this enterprise resources are used more efficiently.

Accounting profit exceeds the economic one by the amount of implicit costs. Economic profit serves as a criterion for the success of the enterprise.

Its presence or absence is an incentive to attract additional resources or switch them to other areas of use.

The goals of the firm are to maximize profits, which is the difference between total income and total costs. Since both costs and income are a function of the volume of production, the main problem for the company is to determine the optimal (best) volume of production. The firm will maximize profits at the volume of output at which the difference between total income and total costs is greatest, or at a volume at which the marginal income is equal to the marginal cost. If the firm's losses are less than its fixed costs, then the firm should continue to work (in the short term), if the losses are greater than its fixed costs, then the firm should stop production.