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 the necessary production factors and the sale of manufactured products. The cost estimate of these costs is the costs of the firm. Most economically effective method production and sale of any product is considered to be such that minimizes the costs of the firm.
Cost has several meanings.
Cost classification
- Individual- the costs of the firm itself;
- Public- the total costs of society for the production of a product, which include not only purely production costs, but also all other costs: protection environment, training of qualified personnel, etc .;
- Production costs- these are costs directly related to the production of goods and services;
- Treatment costs- related to the sale of manufactured products.
Classification of distribution costs
- Additional costs calls include the costs of bringing the manufactured products to the end consumer (storage, packaging, packaging, transportation of products), which increase final cost goods.
- Net distribution costs- these are costs associated exclusively with acts of purchase and sale (remuneration of sales workers, keeping records of trade operations, advertising costs, etc.), which do not generate a new value and are deducted from the cost of the goods.
The essence of costs from the standpoint of accounting and economic approaches
- Accounting costs- This is the cost estimate of the resources used in the actual prices of their implementation. The costs of the enterprise in the accounting and statistical reporting are in the form of the cost of production.
- Economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use. Essentially, all costs are opportunity costs. The task of the economist is to choose the most optimal use of resources. The economic costs of the resource chosen for the production of a good are equal to its cost (value) under the best (of all possible) options for its use.
If the accountant is mainly interested in the assessment of the company's activities in the past, then the economist, in addition, is interested in the current and especially the predicted assessment of the company's activities, the search for the most the best option use of available resources. Economic costs are usually higher than accounting costs. cumulative 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 monetary form, which the company carries out 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) Is the cost of own and independently used resource. The firm views them as the equivalent of the cash payments that would be received for a self-used resource in the most optimal use.
Let's give an example. You are the owner small shop located in your property. If you didn’t have a store, you could rent this premises, say, for $ 100 per month. These are internal costs. The example can be continued. Working in your store, you use your own labor, without, of course, receiving any payment for it. At alternative use your labor, you would have a certain income.
The logical question is: what keeps you as the owner of this store? Some kind of profit. The minimum wage required to support someone in a given area of business is called normal profit. Unearned income from the use of own resources and normal profit together form internal costs. So, from the standpoint economic approach in production costs, all costs should be taken into account - both external and internal, including in the latter and normal profit.
Implicit costs cannot be equated with so-called deadweight costs. Irrecoverable costs- these are costs that are incurred by the company once and cannot be reimbursed under any circumstances. If, for example, the owner of an enterprise incurred certain monetary costs to make an inscription with its name and type of activity on the wall of this enterprise, then by selling such an enterprise, its owner is ready in advance to incur certain losses associated with the value of the inscription produced.
There is also such a criterion for the classification of costs as the time intervals during which they occur. The costs incurred by a firm producing a given volume of output depend not only on the prices of the factors of production used, but also on which factors of production are used and in what quantities. Therefore, there are short- and long-term periods in the activities of the company.
From the division of costs into alternative and accounting costs follows the classification of costs into explicit and implicit. Explicit costs are determined by the sum of the costs of the enterprise to pay for external resources, i.e. resources not owned by the firm. For example, raw materials, materials, fuel, work force etc. Implicit costs are determined by the cost of internal resources, i.e. resources owned by this firm.
An example is not explicit costs for an entrepreneur, there may be a salary that he could receive while working for hire.
Implicit costs, which are part of economic costs, should always be taken into account when making day-to-day decisions.
Explicit costs is an opportunity cost that takes the form of cash payments to suppliers of factors of production and intermediate goods.
Explicit costs include:
§ wage workers
§ cash costs for the purchase and rental of machines, equipment, buildings, structures
§ payment of transportation costs
§ payment of suppliers material resources
§ payment for services of banks, insurance companies
Implicit costs is the opportunity cost of using resources owned by the firm itself, i.e. unpaid costs.
Implicit costs can be represented as:
§ monetary payments that a firm could receive with a more profitable use of its resources
§ for the owner of the capital, the implicit costs are the profit that he could receive by investing his capital not in this, but in some other business (enterprise)
Production and sales costs represent a set of expenditures of enterprises expressed in monetary form for the production and sale of products (works, services). They ensure the continuity of production and create conditions for the sale of products.
first sign of classification: by method of origin:
· Production - costs directly related to the manufacture of products.
Commercial - costs associated with the sale of products
second sign: as appropriate
· Productivity - costs that are justified and appropriate in the given conditions of production.
· Unproductive - costs that arise in connection with insufficient technology and organization of production, with losses from rejects, downtime, shortages, etc. third sign: by the method of attribution to the cost price individual industries:
1) direct - economically homogeneous costs related to the cost of a specific type of product directly in accordance with the justification. Norms and standards.
fourth sign in relation to the technological process:
· Basic costs. These include the costs directly related to the technological processes of manufacturing products.
· Overhead costs. Not associated with technological process manufacture of products and are formed under the influence certain conditions production. These include general production costs, costs associated with the sale.
The fifth sign is according to the degree of dependence on changes in the volume of production .
· Variables. Costs, the amount of which directly depends on changes in the volume of production (raw materials, fuel and energy chains). Drawing.
Fixed or conditionally fixed costs - costs, absolute value which, when production volumes change, does not change or changes insignificantly (heating, telephone costs). drawing
The sixth sign is according to the degree of homogeneity
Elemental or homogeneous costs - costs that cannot be divided into component parts (costs of raw materials, material, wages)
· Complex costs - costs that consist of several homogeneous costs. (general production, general business, commercial).
Seventh sign- depending on the time of occurrence and attribution to the cost of production.
· Current expenses. They arise mainly in this period and refer to the cost of production of the same period.
· Future spending. They are carried out in a given period of time, but are attributed to the cost of production of subsequent periods in a certain proportion.
· Forthcoming costs are costs not yet incurred for which funds are reserved.
Reserves for reducing production costs identified in the analysis process for each item of expenditure. Cost savings can be obtained through specific organizational and technical measures.
Reserves for saving overhead costs are identified on the basis of their factor analysis for each cost item, due to a reasonable reduction in the management apparatus, economical use funds, reduction of losses from damage to materials and finished products, payment of downtime, etc.
Additional costs for the development of reserves for increasing production are determined separately for each type. These are mainly wages for additional output, consumption of materials, raw materials, energy and other variable costs, which vary in proportion to the volume of production.
To determine their value, it is necessary to multiply the reserve for increasing production by the actual level of unit variable costs.
The main factors in reducing the cost of production:
raising the technical level of production;
improving the organization of labor and production;
changes in the volume and structure of industrial products;
7. The role of financial resources in the functioning of the enterprise. Own and borrowed financial resources. Profit: essence, types, sources of formation and directions of use. Profitability and its types.
Financial resources of the organization Is the totality of all Money and receipts at the disposal of the business entity.
The role of finance in economic activity organization is manifested in the fact that with their help it is carried out:
1.service of the individual circulation of funds, that is, there is a change in the forms of value: the monetary form turns into a commodity form, and then the goods acquire back monetary form cost (after the completion of the production processes and the sale of finished products in the form of proceeds from the sale of products;
2.distribution of proceeds from the sale of goods (after payment of indirect taxes) to the fund for reimbursement of material costs, including depreciation deductions, wages fund and net income, acting in the form of profit;
3.Reallocation of net income to payments to the budget (profit tax) and profit left at the disposal of the enterprise for production and social development;
4.use of the profit left at the disposal of the organization (net profit) for consumption funds, savings and other purposes provided for in its financial plan;
5. control over compliance with the correspondence between the movement of material and monetary resources in the process of individual circulation of funds, that is, the state of liquidity, solvency and financial independence of the organization from external sources of funding.
In the domestic practice of planning and accounting, sources of financial resources are divided into own and borrowed ones. The most reliable are their own, since self-financing reduces the risk of bankruptcy and has certain advantages over competitors. The list of sources of enterprises' own financial resources includes:
* retained earnings; Reserve capital; accumulated depreciation charges; Extra capital; insurance claims for incidents, extra-budgetary funds and other funds received by way of compensation; additional issue of shares, issue of depositary receipts.
Reserve capital joint stock companies should form in mandatory... Additional capital is a specific source of financing. Unlike authorized capital, it is not divided into shares and shows the total ownership of all participants.
The formation and increase of additional capital can be carried out in the following cases:
1. Upon receipt of share premium.
2. When revaluing fixed assets.
3. In the event of exchange rate differences as a result of the formation of the authorized capital in foreign currency.
4. When receiving targeted investment funds from the budget to finance capital investments (typical for non-profit organizations).
Additional capital funds can be used: to pay off the amounts of the decline in the value of fixed assets identified by the revaluation results; to increase retained earnings by writing off amounts before assessing retired fixed assets; to increase the authorized capital when making changes to constituent documents; for distribution among the founders of the organization.
When internal sources funding is not enough to cover investment needs joint stock companies can resort to such an option as an additional issue of securities.
Topic number 9. Profit and profitability as the main indicators of efficient production.
1. Costs are explicit, implicit and economic.
2. Normal and economic profit.
3. Costs are fixed, variable and general
4.Creative production costs
5.The structure of creative production costs
6. Profitability.
Explicit, implicit and economic costs.
Any entrepreneur, manufacturer of goods and services seeks to increase their profits, profitability, or profitability "of their enterprise. Profit here falls between two variables: on the one hand, the levels of costs, and on the other, prices. Hence, the main ways to increase profitability follow:
Capital investment in the most profitable spheres of the economy (favorable supply and demand ratio, "good" price);
All-round reduction of production costs.
Profitability is higher where prices are higher and costs are lower. Let's turn to production costs. They are classified according to many criteria. Depending on whether the costs take the form of real cash costs or not, there are explicit and implicit costs.
In the production process, various resources are used, that is, without which the production of any product or service is impossible. These are raw materials, materials, fuel, energy, labor, transport and other resources. All of them in the economic process are reduced to a single
"Profitability - (from German rentabel) - profitable
monetary measure, with which the necessary economic transactions are carried out. The payment for all these resources is the cost of production.
With regard to cultural institutions, these costs are understood as creative and production costs. However, this definition is incomplete and requires some reservations. The point is that not all resources are actually paid. Some of them can be used by the company as if free of charge. For example, if the owner of the bowling club has his own
(owned by him) premises and money capital, and organizes his own business, then the use of these resources will not require direct cash costs from him. In this regard, economists distinguish explicit and implicit costs.
Explicit (external) costs- These are monetary payments for resources received from outside (wages of employees, payment for the supply of raw materials and materials, transport, financial and other legal services). It is only these costs that are taken into account by the accounting department and are called (often) accounting costs.
Implicit (internal) costs- these are the costs associated with the use of the enterprise of its own resources (internal). These costs are not paid and are not reflected in accounting statements... They wear hidden character, speaking as opportunity costs own resources of the company, used by it in production. The magnitude of these costs is determined by the income that could bring these resources with their most profitable alternative use (for example, by giving money in a loan, premises - for rent, and offering their services in the field of management to another company). Profit lost here (%, rent, manager's salary) and
constitutes implicit costs in the provision of services by the bowling club.
Thus, the opportunity cost is the price of choice, or the loss of profit in changing production alternatives. They are sacrificed when choosing other (alternative) goods.
Economists call the sum of explicit and implicit production costs economic costs.
December 29, 2012Costs are expenses, expenditures of monetary resources that need to be made for the production of products. For the firm, such costs act as payment for the acquired factors of production.
Costs are subdivided into fixed, variable and general costs. Fixed costs are those costs incurred by the firm in the production cycle. Fixed costs are determined by the enterprise independently. These costs will be present in all cycles of production of goods in a given enterprise. Variable costs - costs that are carried over to in full for the finished product. General costs are costs incurred by the company during the production stage. That is, total costs represent fixed and variable costs in the amount.
Also, costs are classified into accounting (explicit costs reflected in the balance sheet), as well as alternative. Accounting expenses represent the price of the resources used at their purchase prices. Opportunity cost is both explicit and implicit costs together.
In addition, external, private and social costs are distinguished. External costs are part of the opportunity costs for which this company is not responsible. These costs are covered by the funds of other members of the community. For example, if an enterprise pollutes the environment with its work and is not responsible for it, then the costs of compensation for pollution will represent the external costs of other enterprises or individuals. Private costs - the part of costs that is formed directly by those who are engaged in this activity. Social costs are the sum of external and private costs.
Splitting costs into implicit and explicit
As already noted, dividing costs into accounting and alternative costs leads to a classification into implicit and explicit.
Explicit costs of activities are determined by the total costs of the company to pay for the external resources used, that is, those resources that are not located of this enterprise owned. For example, it can be raw materials, fuels, materials, labor, and so on. Implicit costs determine the cost of internal resources, that is, the resources that are owned by a given firm.
An example of an implicit cost would be the salary that an entrepreneur would receive if he were employed. The owner of capital property also incurs implicit costs, since he could sell his property and put the proceeds in a bank at interest, or rent out the property and receive income. When solving current problems, you should always take into account the implicit costs, and if they are large enough, it is better to change the field of activity.
Thus, explicit costs are opportunity costs that take the form of payments to suppliers of intermediates and factors of production for the enterprise. This category of expenses includes wages and salaries for workers, transportation costs, payments to resource providers, utility bills, payments for insurance companies, banks, cash expenses for the purchase and rent of machinery, equipment, structures and buildings.
Implicit costs mean the opportunity costs of using resources that belong directly to the enterprise, that is, unpaid costs. Thus, implicit costs include cash payments that an entity could have received from a better use of its resources. For the owner of capital, implicit costs include the profit that the owner of the property could have obtained by investing in some other area of activity, and not in this particular area.
Source: fb.ru
Actual
Production costs- these are expenses, money spending that must be carried out to create a product. For the enterprise (firm), they act as payment for the acquired factors of production. From the division of costs into alternative and accounting costs follows the classification of costs into explicit and implicit. Explicit costs are determined by the sum of the expenses of the enterprise for the payment of external resources, i.e. resources not owned by the firm. For example, raw materials, materials, fuel, labor, etc. Implicit costs are determined by the cost of internal resources, i.e. resources owned by this firm. An example of an implicit cost for an entrepreneur would be the salary that he might receive from being employed. For the owner of capital property (machinery, equipment, buildings, etc.), the previously incurred expenses for its acquisition cannot be attributed to the explicit costs of the current period. However, the owner incurs implicit costs, since he could sell this property and put the proceeds in the bank at interest, or lease it to a third party and receive income.
Implicit costs, which are part of economic costs, should always be taken into account when making day-to-day decisions.
Explicit costs is an opportunity cost that takes the form of cash payments to suppliers of factors of production and intermediate goods.
Explicit costs include: workers' wages; cash costs for the purchase and rental of machines, equipment, buildings, structures; payment of transportation costs; communal payments; payment of suppliers of material resources; payment for services of banks, insurance companies
Implicit costs is the opportunity cost of using resources owned by the firm itself, i.e. unpaid costs. Implicit costs can be represented as: cash payments that a firm could receive with more profitable use of its resources; for the owner of the capital, the implicit cost is the profit that he could receive by investing his capital not in this, but in some other business (enterprise)
In the short term, part of the resources remains unchanged, and part changes to increase or decrease the total output. Accordingly, the economic costs of the short-term period are subdivided into fixed and variable costs... In the long run, this division loses its meaning, since all costs can change (that is, they are variable).
Fixed costs- this is a cost that does not depend in the short run on how much the firm produces. They represent the costs of its constant factors of production.
Fixed costs include: payment of interest on bank loans; depreciation deductions; payment of interest on bonds; salary of management personnel; rent; insurance payments.
Variable costs- these are costs that depend on the volume of the firm's production. They represent the costs of the variable factors of production of the firm. Variable costs include: wage; fare; electricity costs; costs of raw materials and supplies
From the graph, we see that the wavy line depicting variable costs rises up with an increase in production.
This means that with an increase in production, variable costs increase: at first, they grow in proportion to the change in the volume of production (until the point is reached); then savings are achieved variable costs in mass production, and the rate of their growth decreases (until the point is reached); the third period, reflecting the change in variable costs (movement to the right of the point), is characterized by an increase in variable costs due to the violation of the optimal size of the enterprise. This is possible with an increase in transport costs due to the increased volumes of imported raw materials, volumes of finished products that must be sent to the warehouse.
Total (gross) costs- these are all the costs at a given point in time required for the production of a particular product. Total costs (, total cost) represent the total costs of the firm to pay for all factors of production. The total costs depend on the volume of products, and are determined by: quantity; the market price of the resources used. The relationship between the volume of output and the volume of total costs can be represented as a function of costs.
