Methods for dividing mixed costs into variable and fixed components. Cost behavior. High and low point method High and low point method
In practice, it is not always possible to single out the variable and constant components of mixed costs, the number of which can reach several dozen. For this, various methods are used, the essence of which can be disclosed using the cost behavior graph (Figure 7.5).
Rice. 7.5. Graphical representation of the relationship "cost volume"
General production costs (C full) consist of two parts: a constant (C post) and a variable (C lane), which is reflected by the equation:
C full = C post + C lane. (7.1)
The sum of variable costs is the product of variable costs per unit of product, that is, the rate of variable costs (per unit) by the volume of products produced in natural units (In n.e. . ):
S lane = s lane + B n.e. (7.2)
Then expression (7.1) can be represented as follows:
S full = S post + s lane ´ V n.e . . (7.3)
Based on specific data, an equation for total costs is built, which, approximating actual data, gives an idea of the dependence of the total costs on the volume of sales.
Consider an example of constructing an equation for total costs and dividing them into constant and variable parts using various methods.
1. Method of the highest and lowest point of the volume of production for the period (algebraic method) assumes the use of the following algorithm:
¨ among the data on the volume of production and costs for the period, select the maximum and minimum values, respectively, of the volume and costs;
¨ find the differences in the levels of production and costs;
¨ determine the rate variable costs for one product by referring the difference in the levels of costs for the period (the difference between the maximum and minimum values of costs) to the difference in the levels of production for the same period;
¨ determine the total value of variable costs for the maximum (minimum) volume of production by multiplying the rate of variable costs for the corresponding volume of production;
¨ determine the total amount of fixed costs as the difference between all costs and variable costs;
¨ make up an equation of total costs, reflecting the dependence of changes in total costs on changes in production.
Example 7.3. Table 7.4 shows the initial data on the volume of production and costs by months of the analyzed period.
Table 7.4 Data for cost analysis using the method of high and low points of production for the period
According to the table. 7.4 it can be seen that the maximum production volume for the period is 340 units. (in November), minimum ¾ 200 units. (in January). Accordingly, the maximum and minimum production costs are 196 and 140 thousand rubles. The difference in the levels of production is 140 units. (340 thousand rubles - 200 thousand rubles), and in cost levels ¾ 56 thousand rubles. (196 thousand rubles - 140 thousand rubles).
The amount of variable costs per product will be:
56,000: 140 = 0.4 thousand rubles / unit
The total amount of variable costs for the minimum production volume is 80 thousand rubles. (0.4 thousand rubles: units ´ 200 units), and for the maximum volume ¾ 136 thousand rubles. (0.4 thousand rubles: units ´ 340 units). The total amount of fixed costs is determined as the difference between all costs for the maximum (minimum) volume of production and variable costs. For our example, it will be 60 thousand rubles. (196 thousand rubles - 136 thousand rubles or 140 thousand rubles - 80 thousand rubles). The equation of costs for this example in accordance with expression (7.3) has the form:
C full = 60 + 0.4 ´ V n.u. ...
The high-low point method is easy to use, but its disadvantages should be noted:
¨ using only two values ¾ the largest and the smallest means that the results may be skewed due to random variations in these values;
2. The dispersion method. More accurate is method variance or a scatter that includes all observed points in the value data. After the image of the points, a regression line is drawn so that an equal number of points remain above and below this line. The point of intersection of the regression line with the vertical axis will show the sum of the fixed costs. Using the total cost for a point falling on the regression line, a variable cost element is obtained. Further, by dividing this amount by the level of activity at the same point, the variable cost rate is obtained.
A variance plot can be of great benefit to the experienced analyst. Jumps in cost behavior caused by strikes, bad weather, power outages, price increases during the period inflation , become apparent. An experienced observer can make appropriate adjustments (discard pop-up results, evaluate reliable data separately, divide a long period of time into a number of shorter intervals, etc.). In addition, almost any value analysis is useful to start with a graphical representation.
Example 7.4. It is necessary to analyze the mixed costs associated with the delivery of the goods. Actual data on these costs are reflected in table. 7.5.
Table 7.5. Data for Cost Analysis Using the Variance Method
Based on the graphical interpretation, the task is to construct a straight line from these data, shown in Fig. 7.6.
Rice. 7.6. Linear approximation of actual data
C full = 9.7 + 2 ´ V n.u. ...
3. Least squares method... If, when constructing a graph using the variance method, the line is drawn visually, then the selection of a straight line of total costs when using the least squares method is performed using standard regression analysis techniques. It is based on calculations based on the straight line equation (7.4):
Y = ax + b (7.4)
where Y¾ dependent variable;
a¾ the degree of variability (or the tangent of the slope of the regression line);
b¾ permanent element;
x¾ independent variable.
Least square method used to find such a and b so that the values of the dependent variable obtained from the regression equation Y approached as close as possible to its observed values. Let the error be:
where Y¾ observed value,
Expected value.
The least squares method allows you to minimize the sum of squares of deviations of the observed value from the expected, i.e.:
(7.6)
From the basic equation (7.6) and the set of observations n regression equations can be obtained:
∑ XY = a∑ X 2 + b∑ X, (7.7)
∑ Y = nb + a∑ X, (7.8)
where X¾ volume of production (sales), natures. units;
Y¾ general (mixed) costs;
a¾ variable cost rate;
b ¾ fixed costs ;
n¾ number of observations.
Example 7.5. Suppose a business wants to split its costs into variable and fixed parts. Electricity costs ( Y) and production volume ( X) are presented in table. 7.5.
Substituting these sums into equations (7.7) and (7.8), we obtain:
1158 a + 116 b = 3487; (7.9)
116 a + 12 b = 353. (7.10)
To solve, one of the expressions should be eliminated: multiplying (7.9) by 12, and (7.10) by 116, it follows from (7.9) to subtract (7.10):
13 896 a + 1392 b = 41 844
13 456 a+ 1392 b = 40 948
440 a = 896
a = 2,0364
Consequently, the variable rate in the cost of electricity is 2.0364 thousand rubles. for each thousand of manufactured products (or 0.0020364 thousand rubles / product). Fixed costs for electricity can be obtained by substitution in any of the equations: (7.9) or (7.10):
116 a + 12 b = 353
116 ´ 2.0364 + 12 ´ b = 353
12 b = 353 - 236,2224
12 b = 116,7776
b = 9,7315
Thus, the fixed cost of electricity is RUB 9,731.5. per month, the rate of variable costs is 2036.4 rubles. per 1000 manufactured products. The cost equation in accordance with expression (7.3) for this example looks like:
With full. = 9.7315 + 2.0364 ´ V n.u.
The cost formula can be used for purposes planning ... Let's assume that 10,500 items can be produced within the next month. At this level of activity, the cost of electricity will be, thousand rubles:
With full. = S post + s lane ´ In n.e. = 9.7315 + 2.0364 ´ 10.5 = 31.1137 thousand rubles.
4. Alternative method. Consider an alternative to least squares approach. Suppose that the company wants to determine the formula for the cost of maintaining and operating equipment. The preliminary analysis revealed that the variable part of the costs depends on the number of machine-hours worked. It is necessary to obtain a cost formula based on the data of the first half of the planning period using an alternative method (Table 7.6).
Table 7.6
The average values are determined:
(7.12)
The variable cost rate is:
The total fixed costs are determined from the equation:
For this example:
0.0016 thousand rubles / mash-h. ´ 556.833 machine-hours + b= 1,955 thousand rubles;
b= 1.955 - 0.912 = 1.043 thousand rubles. per month.
The cost equation in accordance with expression (7.3) for this example looks like:
With full. = 1.043 + 0.0016 ´ V n.u. ...
The total cost graph is shown in Fig. 7.7.
Rice. 7.7. Cumulative Cost Chart
In all calculations, one independent factor was taken ¾ productivity (production or sales, direct labor hours, machine hours, sales proceeds)... But dependence on production volume and sales is clearly visible not for all types of costs, i.e., there is not always a strong correlation between a specific type of cost and the volume of production (sales). It is recommended to use additional factors:
¨ production volume in kind;
¨ sales volume in monetary terms;
¨ direct labor costs;
¨ operating time of technological equipment;
¨ consumption of electrical energy, etc.
... Cost function is a mathematical description of the relationship between costs and "their factors
The presence of different costs complicates the construction of the cost function. That is why various methods are used to determine the cost function (Fig. 177)
... Fig. 177. Methods for constructing the cost function
In practice, there are several cost factors, but one or two influential factors are mainly chosen to construct the cost function.
... Cost prediction - forecasting future costs for different levels (conditions) of activity
1722 Technological Analysis
... Technological analysis (engineering method) - a systematic analysis of the function of activity in order to determine the technological relationship between the cost of resources and the result of activity
This analysis requires a detailed study of all operations, the feasibility of their implementation, the determination of the necessary operations, the need for resources and an assessment of the adequacy of their use. This is a kind of functional and cost analysis of activity. This method is convenient and effective in enterprises using the "standard-cost-cost" system.
... The advantage this analysis is that it focuses on future operations and not on the study of past activities
However, the disadvantage is that it requires a significant investment of money and time.
1723 Account Analysis Method
... Account analysis method (method of analyzing accounting data, method of analyzing accounting accounts) - a method for determining the cost function by dividing them into variables and constants according to the appropriate factor based on the study of data from accounting accounts. It is carried out by a specialist on the basis of intuition, experience and observation of the dynamics of costs of past periods.
... The advantage this method is the ability to calculate the functions of all costs of the enterprise. Also, this method is widely used in practice due to its simplicity and clarity.
Since this method is based on the experience of managers and the analysis of past events, the disadvantages of the method are considered a certain subjectivity and the possibility of significant differences between future and past conditions of action.
1724 High-Low Point Method
... High-Low Point Method (method of absolute increment, minimax method) is a method of determining a cost function based on the assumption that variable costs are the difference between the total costs of high and low levels of activity; this method uses a high and a low point. The highest point is defined as the point corresponding to the highest output or highest level of activity. The lowest point is defined as the point with the lowest output or the lowest level of activity.
This method is the simplest and quite widespread abroad.
The essence of this method is that we draw a line of the cost function through the high and low points of the graph, ignoring all other points. But if other points do not have a close relationship with the maximum and minimum t points, the cost function does not reflect the real relationship between costs and their factor.
1725 Visual adaptation method
... Visual adaptation method (graphical method of visual observation, graphical method) is a graphical approach to determining the cost function, in which the analyst visually draws a straight line, taking into account all points of expenditure. It belongs to non-mathematical methods.
... The advantage is the visibility of the nature of the behavior of costs ... Disadvantage this method is subjective, since the results of calculations significantly depend on the accuracy of the eye and the inflexibility of the analyst's hand
1726 Regression Analysis Method
... Regression analysis is a statistical model used to determine the change in the mean of a dependent variable under the influence of a change in the value of one or more independent variables
When applying regression analysis to determine the cost function, the total cost is considered as a variable depending on a certain factor (production volume, number of orders, etc.), which acts as an independent value.
Regression analysis, as opposed to the trough-trough method, takes all observation data into account to determine the cost function
... Least square method is a statistical method that allows you to calculate the elements of the cost function but also in such a way that the sum of the squares of the distance from all points of the studied population to the regression line is the smallest
... Simplified statistical analysis is a method for determining the cost function, which provides for the distribution of indicators into two groups, based on the growth of the value of x, and the calculation of fixed costs based on the average values of x and y. This method was proposed by a Ukrainian scientist, academician. MG. Chumachenkonko.
... The advantage methods of regression analysis is to ensure the objectivity of methods by accurate mathematical calculations. but disadvantage the need for a large number of observations of the response of costs to a change in a factor
A generalized characteristic of methods for studying the behavior of costs can be reflected using the table (Table 172)
Management judgment can be used alone or in combination with trough-trough, scatterplot, or least squares techniques to estimate fixed and variable costs.
... Table 172 ... Characterization of methods for studying cost behavior
173 Management Judgments in Determining Cost Behavior
... Managerial judgment are extremely important in determining cost behavior and in practice is the most widely used method. Many executives simply use their experience and past observations of the adequacy of cost pits to determine fixed and variable costs. This method, however, can take many forms. Some executives simply classify the costs of a particular activity as fixed and others as variables, ignoring the mixed costs.
The advantage of using management judgment in separating fixed and variable costs is its simplicity. In situations where the manager has a deep understanding of the firm and its spending patterns, this method can produce good results. However, if the manager does not have the appropriate judgment, this method will lead to errors. Therefore, it is very important to take into account the manager's experience, the potential for error, and the impact that the decision can make to the appropriate decision.
In foreign practice, a number of effective methods have been proposed to improve the efficiency of cost allocation for fixed and variable costs and to construct a cost equation:
Method of the highest and lowest point of the volume of production for the period;
Graphic method;
Economic and mathematical modeling.
1. Method of the highest and lowest point of the volume of production for the period.
Initial data for analysis
|
Month of the year |
Production volume, pcs. |
Production costs, thousand rubles |
|
|
min |
1 |
100 |
70 |
|
max |
11 |
170 |
98 |
The total production costs consist of 2 parts:
,
To construct an equation of total costs and divide them into constant and variable parts according to the method of the highest and lowest points of the volume of production for the period, the following algorithm is used:
1. Among the data on the volume of production and costs, select the maximum and minimum values of the volume and costs (1 and 11 months).
2. Find the differences in the levels of volume and costs:
3. Determine the variable costs for 1 product:
4. Determine the total amount of variable costs at the maximum or minimum volume of production: 
5. Determine the total amount of fixed costs:
6. Make up the equation of total costs, reflecting the dependence of total costs on changes in the volume of production:
2.Graphic method. The dependence of the total costs on the change in the volume of production is shown by a straight line passing through three points.
100 170 Q (pcs)
3. Economic and mathematical modeling. The equation of total costs, reflecting the dependence of total costs on changes in the volume of production, is derived on the basis of processing statistical data using economic and mathematical methods
Break-even analysis of activities. Monetary equilibrium point, contribution to coverage, financial strength, operating leverage.
The management decision is based on the establishment of a mathematical relationship between cost, production and profit.
Total production costs ( 
) consist of two parts: constant ( 
) and variable ( 
).
or 
,
where 
- fixed costs per unit of product;
–Variable costs per unit of product;
- the volume of production, units.
Revenue from sales of products in rubles ( 
) is determined by the formula: 
,
where p is the unit price.
Revenue is related to the cost of manufacturing products ( 
) and sales profit ( 
) by the following relation: 
.
If the company is working profitably, then 
, if unprofitable, then 
... At the break-even point, there is no profit or loss - 
.
The break-even point or critical production point is the sales volume ( 
), in which the revenue is equal to expenses, and the profit is equal to zero, or the volume of production at which the total amount of marginal income reimburses the total amount of fixed costs.
The determination of the break-even point is made using a graphical or algebraic method.
1. Graphical method consists in plotting the schedule of changes in revenue and the total amount of costs depending on changes in the volume of production and sales of products (in units) and determining the point of their intersection, at which the revenue will be equal to the amount of costs.
Determination of the point of the critical volume of production by graphic method.
Z, S Loss area Profit area
Q * den Q * Q
2. Algebraic (calculation) method.
The revenue at the break-even point is equal to the cost, and the profit is 0:
;
;
,
Using mathematical transformations, we determine:
1. The volume of sales at the break-even point: 
, where d is the unit marginal income d = p-C V.
2. Revenue at the break-even point: S * = pQ *.
3. Cash breakeven point. Not all fixed operating costs involve cash payments (eg depreciation charges). Therefore, if non-monetary costs are subtracted from the sum of fixed costs, then we will determine the monetary equilibrium point.
The cash equilibrium point is the sales volume that breaks even the cash flow. It is below the sales volume at the equilibrium point, and is determined as follows:
, where AO - depreciation charges.
4. Equation for determining the critical level of fixed costs: 
5. Critical selling price: 
.
6. Planned volume of production to obtain a given planned amount of profit: 
.
Using formulas:
S = Z + R = Z C + Z V + R;
you can derive formulas that allow you to perform calculations and answer the following questions:
What will be the profit if the volume of sales increases by a given percentage?
R 1 = Q 0 * (1 + m * Q) * d-Z C;
What will be the profit with a possible increase in fixed costs by a given percentage?
R 1 = Md-Z C 0 * (1 + m * Z C).
How many units do you need to sell to get a given profit?
.
What should be the price in order to sell a given number of products to get a given profit?
p * Q = Z C + C V * Q + R
.
How many units do you need to sell to break even?
.
For further use, we will introduce several more indicators.
Enterprise strategy with sufficient RFP- investing in production, personnel, development of new markets, types of products, securities.
Enterprise strategy with insufficient ZFP- strict cost control and optimization of all activities.
Analysis of the impact of the cost structure on the financial performance of the Direct Costing system
Redistribution of costs within the unchanged total cost is reflected in the financial performance of the enterprise. In order to influence financial performance, you can change the cost structure.
For example, we will transfer part of variable costs (10%) to the category of fixed ones. Let's evaluate how this affects financial indicators:
|
Indicators |
Symbol |
Basic variant |
The change |
New variant |
change in indicators |
|
Revenue, thousand rubles | |||||
|
Total costs, thousand rubles incl .: variables permanent | |||||
|
Marginal income, thousand rubles | |||||
|
Profit, thousand rubles | |||||
|
Sales volume at the break-even point, pieces (WITH V = 160 rubles, p = 250 rubles) | |||||
|
Revenue at the break-even point, thousand rubles | |||||
|
Operating Lever Level | |||||
|
Financial safety margin |
Conclusion: The decrease in variable costs by 10% led to an increase in the break-even point by 3.5%, to an increase in the level of operating leverage by 17.8% (to an increase in the level of risk) and to a decrease in the financial safety margin by 15.3%.
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According to international standards to stocks include the following types assets:
intended for sale in the course of the organization's activities;
• produced during production for sale;
• used in the form of raw materials or materials in the production process or the provision of services.
Inventories are accounted for according to the following classification groups: goods, raw materials, materials, work in progress, finished goods
duction.
International standards require inventories to be valued at the lower of cost and possible net realizable value, which is the estimated selling price under normal conditions of sale less projected labor and selling costs.
The method of assessing the inventory depends on the applied scheme of their accounting. It is possible to use three schemes for accounting for stocks using cost and physical meters:
1. Individual(by subject), in which the movement of each individual unit of stock is monitored.
2. In-kind, under which the control over the movement of stocks for individual items in value and physical terms is carried out.
3. Cost, in which control is carried out as a whole over the entire volume of the stock only in value terms.
The individual organization of accounting for the movement of stock allows you to get the most accurate estimate, however, this method is the most laborious.
Of the other two methods of accounting for reserves, one of the following methods of estimating them is most commonly used:
at the average cost;
at the cost of the first purchases in time (FIFO);
at the cost of the most recent purchases (LIFO).
Assessment of reserves FIFO method is based on the assumption that material resources are used during the reporting period in the sequence of their purchases, that is, the resources that are the first to enter production should be estimated at the cost of the first purchases taking into account the value of the values at the beginning of the month. The estimate of the inventory is determined as the product of the amount of the remaining inventory at the last reporting date by the cost
most recent deliveries. The use of this method makes it possible to obtain an estimate of stocks at the end of the reporting period, which is the most adequate to the current situation in the market for this stock, since this estimate was formed at the price of the last purchases.
LIFO method is based on the opposite assumption to the FIFO method, that is, the resources that are the first to enter production should be estimated at the cost of the latter (sequentially) in terms of the time of purchases. The stock valuation is determined by multiplying the stock balance in physical terms by the value of the first deliveries, taking into account the remainder. The use of this method in an inflationary environment leads to an underestimation of the inventory at the end of the reporting period, since the estimate is made at the actual cost of early purchases.
Assessment of reserves average cost method is defined as the product of the quantity of the stock at the end of the reporting period by its average price. The average stock price is determined as the quotient of dividing the value of the stock owned by the organization in the reporting period by the amount of stock in its own
the identity of the organization for the same period.
The use of different methods for assessing reserves leads to different financial indicators of the organization's activities, so the choice of method should be based on a thorough analysis of the organization's activities and is recorded in its accounting policy.
3. ACCOUNTING COSTS AND RESULTS AS A MEANS
MANAGEMENT DECISION MAKING
3.1. Budgeting and budgeting in accounting,
procedure for its implementation
Budget Is the plan of an organization or center of responsibility, expressed in natural or monetary units, for managing revenues, expenses and liquidity.
The budgeting system allows the management to preliminarily assess the effectiveness of management decisions, optimally allocate resources between organizational units (responsibility centers), outline development paths and avoid a crisis situation in the activities of an economic entity. Its effectiveness determines the efficiency of the organization.
The budgeting process is conventionally divided into the following stages:
1. Determination of the goal to achieve which the development and implementation of the budget will be directed.
2. Identification of sources of information and the implementation of its collection.
3. Determination of the range of users by the budget.
4. Determination of the structure of the budget.
5. Collect information to prepare each section of the budget.
6. Direct budgeting.
Budgeting activities of different levels of management pursues the following goals:
development of a concept for the implementation (planning) of financial and economic activities for a certain period; optimization of income, costs and profits; coordination of profits;
communication - communicating plans to the heads of responsibility centers;
motivation of the heads of responsibility centers to achieve the set goals;
control and assessment of the effectiveness of the heads of responsibility centers by comparing actual results of activities with the normative ones;
identification of needs for cash resources and optimization of cash flows;
When implementing budgeting, they adhere to the following main principles:
• flexibility is constant adaptation to changes in the environment in which the organization operates;
• continuity assumes “rolling” planning;
communicativeness is communication and integration of efforts of all divisions of the organization (everything should be interconnected and interdependent);
iteration assumes the creative nature of planning and repeated elaboration of the already drawn up sections of the plan;
multivariance is the development of the best of the alternative possibilities to achieve the set goal;
• participation is the importance of the planning process itself in terms of involving all possible participants in it;
• Adequacy is the reflection of real problems and self-assessment in the planning process.
The classification of budgets by planning volumes can be represented in the form of a hierarchical scheme (Fig. 5).
Rice. 5. Classification of budgets by planning objects
Budgets are developed both for the organization as a whole (free budget) and for its structural units or individual functions of activity (private budgets). On a time basis, they cover the fiscal year with a quarterly and monthly breakdown based on continuous planning.
Table 4. General budget of the organization
| | Types of budgets |
| Operational budget | Sales budget (turnover, volume of products sold) |
| Inventory budget at the end of the planning period |
|
| Raw material procurement budget |
|
| Cost of sales budget |
|
| Gross income budget |
|
| Variable cost budget |
|
| Fixed cost budget |
|
| Profit and loss planning |
|
| The end of the table. 4 |
|
| Components of the general budget | Types of budgets |
| Financial budget | Capital investment budget |
| Cash budget |
|
| Forecast balance sheet |
|
Operational budget reflects the current activities of the centers of responsibility and the organization as a whole.
Financial budget- This is forward-looking information about the financial condition of the organization.
The operational budget begins with sales budget, since all other economic indicators of the organization largely depend on its value. This planning involves market research, determining the dynamics of demand, studying the strategy of competitors, etc. This budget is formed both "top-down" (direction based on market capacity, market share), and "bottom-up", taking into account the demand for certain types of products and the needs for them of individual buyers.
Inventory and procurement budgets- This is the calculation of the organization's need for material resources and the development of measures for organizing their purchases in the required amounts.
The profit and loss plan can be presented in the form of a table. 5.
Table 5. Profit and loss plan
| Indicators | Responsibility centers (separate type of product) (), % | Total by organization (), % |
| 1. Sales volume | ||
| 2. Cost of sales | ||
| 3. Gross income | ||
| 4. Variable costs | ||
| 5. Marginal income (p. 3 - p. 4) | ||
| 6. Fixed costs | ||
| 7. Operating profit (p. 5 - p. 6) | ||
| 8. Income and real estate tax | ||
| 9. Net income (line 7 - line 8) |
When forming budgets for responsibility centers, a prerequisite is the use of the “zero balance” method, which implies that budgets should not be drawn up on the basis of costs for the past period, but on the basis of planned activities.
The budget must be formed on the basis of one of the alternative plan options:
pessimistic(should pursue a minimum goal and require the maximum reduction of available resources);
probabilistic(should focus on achieving maximum goals with moderate use of resources);
optimistic(must provide for the achievement of the maximum goal with the efficient use of all resources).
The prepared budgets must meet the following requirements:
1. Be tense but attainable.
2. Only a valid budget has the right to exist, and shadow or emergency are not acceptable.
3. To be a generalizing plan in natural and monetary units.
4. The person responsible for the execution of the budget should be involved in its development.
5. Should be a kind of instruction for recording on the accounts of accounting.
6. Must remain constant during the budget period.
Depending on the purposes of comparison and analysis, budgets are divided into static and flexible.
Static budget calculated for a specific level of business activity of the organization. It reflects the very fact of the achieved result. It is used to compare and analyze the absolute values of indicators, both in monetary terms and in percentage terms.
Flexible budget Is a budget adapted to different levels of sales. It takes into account changes in costs depending on changes in the volume of sales and is a dynamic basis for comparing the results achieved with the planned indicators.
3.2. Organization of cost and benefit accounting
in financial and management accounting
The organization of accounting for production costs is based on the following principles:
documenting costs and their full reflection on production accounts;
grouping of costs by accounting objects and places of their origin;
consistency of cost accounting objects with the objects of calculating the cost of production and indicators of accounting for actual costs with the plan;
expediency of expanding the range of costs related to accounting objects for their intended purpose;
localization of costs caused by the manufacture of certain products;
separate reflection of costs in accordance with the current norms and deviations from these norms, as well as systematic accounting of changes in norms and their impact on production costs;
implementation of operational control over production costs and the formation of the cost of manufactured products.
In different industries, cost accounting objects can be different cost accounting units (one product (order); 100 pairs of shoes or dishes; 10 kg of a product or other weight indicator, etc.).
The production process includes organically related and interdependent stages:
1. Cost accounting for production facilities and cost centers.
2. Calculation of the cost of production.
In management accounting, as in financial accounting, the accounting of production costs and results is divided into the following accounting processes:
accounting of the procurement process;
accounting of the production process;
accounting for the implementation process.
3.3. Features of the management approach to the relationship
costs, income and profits with the volume of production
Understanding cost behavior is key to making management decisions in an organization. Professionals who understand how costs behave are better able to predict changes in costs in different production areas.
To determine the relationship "cost - volume", that is, to determine the component of fixed and variable costs per unit of production, you can use the following methods:
method based on entries in accounting registers;
visual method;
method of high and low points, or the method of "mini-maxi";
the method of least squares.
The essence method based on entries in accounting registers, is that accounting entries are analyzed by registers. Moreover, each of the amounts attributable to cost accounts is classified as fixed, variable or mixed costs. After that, their total is determined by analyzing work orders, supplier invoices, timesheets, etc. This method is laborious, rarely used, and can be used to classify costs into different types.
Visual method used when costs are mixed or when there is no clarity about their behavior. In this case, observations can be useful to determine the dependence of costs and volume. Here, based on direct observation, an approximate graph of the behavior of mixed (unclear) costs and volume is built.
The method of high and low points, or the method "mini–maxi" based on monitoring the value of costs at the maximum and minimum volumes of production activity. Variable unit costs are defined here as follows:
The fixed costs are then determined by subtracting the variable costs at the appropriate volume from the total costs.
Then they make up the following cost formula:
Z = NS 2 + NS 1 V,
Where Z- expenses;
NS 2 - fixed costs;
NS 1 - variable costs per unit of output;
V- volume of production.
This method gives the most accurate information only in the area of relevance and may not give the desired results outside of it.
Using least squares method the direct relationship between the considered indicators is constructed so that the sum of the squared deviations of the distances from all points to the theoretical regression line would be minimal. To establish the relationship between costs and volume of production, as well as the amount of costs, methods of mathematical statistics are used (for example, the method of least squares). It uses a direct relationship function that reflects the relationship between the dependent and independent variables, called regression equation... This equation is as follows:
y = a + bx,
Where y- dependent variable (total costs, mixed costs);
a
b- variable costs;
x- volume of production.
The essence of the method under consideration is that the sum of the squares of the actual deviations of the function at from the values found by the regression equation should be the smallest:
(Y i – Y i J) min,
Where Y i- actual value;
Y i J- calculated values calculated according to a given formula.
This condition leads to a system of normal equations, the solution of which makes it possible to determine the parameters of the regression equation:
xy = a x + bx 2
y = na + bx,
Where n- the number of observations.
Analysis of the ratio "cost - volume - profit" (Cost - Volume - Profit), or "CVP analysis" helps managers in the following cases:
understand the relationship between product price, direct unit costs, fixed costs, mixed costs;
• trace the relationship between costs, production and profits.
Thus, the analysis of the ratio "costs - volume - profit" is a key factor in the process of making management decisions that relate to the issues of the range of products, production volume, type of marketing strategy, etc.
The "CVP-analysis" method is based primarily on determining the marginal profit (the difference between sales proceeds and variable costs, that is, this is the amount sufficient to cover fixed costs and then make a profit).
Sales revenue, variable and fixed costs, and profit margins can be expressed as a percentage.
The ratio of the marginal profit to the amount of sales proceeds is called margin rate which is calculated as follows:
.
This rate shows what effect the change in the amount of sales proceeds has on the profit margin.
Knowing the rate of marginal profit, you can determine the expected profit with an increase in production or sales.
Obviously, you can achieve an increase in profits by increasing the margin profit. This can be achieved in different ways:
reduce the sales price and, accordingly, increase the sales volume;
increase fixed costs and increase sales;
proportionally change variable, fixed costs and output.
"CVP analysis" is sometimes called analysis critical point (dead center, break-even point or equilibrium point). It is understood as costs equal to the proceeds from the sale of all products, that is, this is the volume of sales at which the organization has neither profit nor loss. Three methods are used to calculate it:
1.Equation method... It is based on the fact that any financial result can be presented in the form of the following formulas:
Profit = Revenue - Variable costs - Fixed costs
Profit per unit of production =(Unit price x × Number of units – Variable unit costs NS Units - Cumulative Fixed Costs): Units.
Another financial result can be presented in the form of an equation
ax = bx + c+ 0, hence
Oh – in = with,
Where a- unit price;
v- variable costs;
with- the total amount of fixed costs;
0 - (zero) profit;
NS- break-even point of a unit of production.
2.Margin profit method is a kind of the method of equations.
As noted above, the profit margin equals revenue minus variable costs. Therefore, the marginal profit per unit of output is equal to the price minus the unit variable costs (i.e., the cost per unit of output).
The essence of this method stems from the concept of marginal profit, that is, it allows you to determine how many units of production must be sold to cover all fixed costs. In doing so, the following formula is used:
If the rate of margin profit is known, then the break-even point is calculated as follows:
3.Graphical method provides a visual representation of the breakeven point (BEP). Finding it is reduced to the construction of a complex schedule "costs - volume - profit".
The sequence of plotting (Fig. 6) is as follows:
We plot the line of fixed costs on the graph, for which we draw a straight line parallel to the abscissa axis.
Select any point on the abscissa axis, that is, some volume value. We calculate for this point the value of total costs (constant and variable) according to the formula
y = a + bx.
We build a straight line on the chart corresponding to this value.
Select again any point on the abscissa axis and for it we find the amount of proceeds from sales. We build a straight line corresponding to this value.
Find the break-even point on the chart. This is the intersection of direct "total costs" and "revenue".
Rice. 6. Break-even point (BEP) chart
You can build another graph, which immediately shows how profit changes with a change in production volume. It is called the profit margin chart (Fig. 7) and is constructed as follows:
The ordinate is the value of fixed costs, assuming production is zero. This point will be in the loss zone.
We calculate the expected amount of profit for a given value of the volume of production (it must be greater than the volume at the break-even point).
Find the corresponding point on the graph, connect it to the point that denotes the amount of fixed costs. The profit chart crosses the zero mark at the volume equal to the volume of the break-even point. The vertical distance between these lines shows the expected loss or expected profit for different sales volumes.
R 
is. 7. Margin profit chart
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