The main types of production costs. What are fixed and variable costs What does the concept of costs include

Every person who is at least a little interested in the economy understands that any enterprise has income and incurs expenses, carrying out any economic activity.

At the same time, they can be taken into account and interpreted in different ways, which opens up a large field for research on the effectiveness of production activities.

Issues that affect economic costs were raised by well-known scientists, such as Karl Marx, John Forbes Nash and others. The relevance of this issue is determined by the eternal search for the golden rule of business: maximizing income while minimizing costs.

Today, companies are hiring experts on the subject to find ways to cut costs or invest capital in profitable industries.

In economic theory, the cost of production of one type of product is determined by the maximum value of resources that they could have if they were used to produce another type of product.

economic costs. Essence

Perhaps, economics is one of the few sciences dealing with a large amount of mathematical data, where any phenomenon can be described by many different words and definitions.

Therefore, there are many definitions of what economic costs are. But if you carefully analyze each of them, then the meaning of all of them is reduced to one.

Economic production costs are all expenses incurred by a business entity in the process of manufacturing products or providing services.

That is, these are absolutely all costs: for electricity, gas, water, heating, fuels and lubricants, wages, resources, reserves, equipment maintenance, depreciation of fixed assets and many other types of expenses.

They study their essence in order to find ways to optimize and reduce the level of expenses of the enterprise in order to increase profits.

Types of costs

Economic costs according to the place of occurrence are divided into:

• external;
• internal.

Under external understand such costs that the company incurs for the purchase of any resources, raw materials or materials, energy or other valuables acquired from third parties.

This may be fuel purchased at a gas station, metal structures necessary for further use when creating a new result of labor. Also, they are the costs of paying for the work of hired labor (payment of wages, accruals and other material rewards), maintenance of own equipment in the event that it is carried out by its own workers, etc.

Internal economic costs are those costs that are associated with the movement, as well as the use of resources that are owned by the enterprise at the time of transactions with them.

They characterize the cost of using own resources for the manufacture of selected goods or services, instead of using them in other production. They are also described as imaginary lost income of the enterprise from the current use of its material wealth.

What do they include?

Economic costs include:

1. Attracted (purchased) resources in the market.
2. Those resources that the enterprise has and do not directly participate in the turnover.
3. A normal level of profit that reflects and pays for the risk of doing business.

All these three points should be included or included in the price by the management of the enterprise. This is necessary for the successful functioning of the company in the market with the proper level of profitability. Therefore, there is also the concept of "opportunity costs", which is synonymous with economic costs.

Not all internal costs are shown in accounting

Despite the types of economic costs listed above, it is worth pointing out some of their differences that occur when comparing accounting data and the results of economic analysis.

If, according to the balance sheet of the enterprise, the actual profit is visible, then this does not always indicate the presence of a positive economic result of the activity - it can be negative. Why is that?

Accounting costs will always be less than economic

The internal economic costs of the enterprise are not recorded in accounting, as they do not imply capital movements. This is the essence of the difference between accounting and economic analysis.

If economic costs separate internal and external, then accounting includes only external costs. That is, the first type of costs includes accounting.

Why know the level of economic costs?

Such knowledge is needed so that any director, head or any other management body can evaluate the further expediency of doing business in their industry.

For example, let's take a small firm that manufactures and sells clothing for adults. Suppose she has the following monthly expenses:

1. Purchase of fabric - 50 thousand rubles.
2. Purchase of threads - 10 thousand rubles.
3. Purchase of snakes, buttons - 30 thousand rubles.
4. Maintenance of working machines and other equipment - 5 thousand rubles.
5. Remuneration for work and management personnel - 60 thousand rubles.
6. The cost of electricity, gas, water required for the production and maintenance of jobs - 40 thousand rubles.
7. Rent for fixed assets - 20 thousand rubles.
8. The cost of selling products - 15 thousand rubles.

At the same time, it is possible to produce 1000 units of goods (clothing) every month and sell such a batch for 300 thousand rubles.

If we add up all the costs that are needed to produce such a batch of products, then the total cost is 230 thousand rubles.

In order to evaluate the efficiency of production, you can find the cost and profitability of production of 1 unit of output.

In this case, the cost is 230 rubles per unit of goods. At the same time, the profitability is at the level of 30%.

It is not enough to know only the cost and profitability in order to give an economic assessment of the feasibility of production.

It would seem that good indicators. But in order to make effective management decisions on investing in fixed assets or reducing production, you need to understand the level of economic costs.

As stated above, they consist of internal and external. So, all 8 items of monthly expenses are external.

Find out the level of internal costs

Suppose a business owner would place this amount (230 thousand rubles) in a bank deposit account. Given that the average interest in the Russian Federation on deposits in rubles is at the level of 9-10% per annum, he would receive a monthly profit of 1725 rubles.

If we compare the income from the deposit with the profit from the business, it becomes clear that one's own business is much more successful than placing funds in a bank at the offered interest.

In a similar way, you can compare the production of clothing with other types of business.

Suppose an entrepreneur has the opportunity to engage in mining. The average profitability of this industry in the Russian Federation is at the level of 53-54%.

Let's calculate the economic costs

Let's make a calculation: an entrepreneur can invest 230 thousand rubles a month in a new business. If everything goes well, then every month he would receive an income of 352 thousand rubles, and the profit would be 122 thousand rubles.

In order to calculate the level of internal costs in this example, it is necessary to subtract 70 thousand rubles from 122 thousand rubles (profit received from the production and sale of clothes).

We get the result: internal costs are equal to 52 thousand rubles, which means the imaginary lost income from the inefficient use of their capital by the entrepreneur.

Based on this indicator, it is possible to recalculate the level of profitability of capital investment per 1 unit of production, taking into account the allegedly lost income - you get 6%.

From all this it follows that the entrepreneur could earn 52 thousand rubles more every month, and therefore, perhaps, he should reconsider his policy and start mining.

But of course, the above calculations are theoretical. In fact, the cost structure of any enterprise is much wider, and its level depends on many factors that can be influenced by both its managers and circumstances beyond their control.

Conclusion

The economic costs of a firm, enterprise, company are used in management accounting to clarify the assessment of financial results obtained from economic activity.

Knowing their structure and size, one can understand whether all available resources are effectively used in the process of manufacturing products or providing services.

Knowing how to correctly use the results of the analysis of economic costs, you can easily find ways to optimize them, increase the efficiency of a unit of each good spent, and also get rid of unnecessary costs in operations with tangible or intangible resources.

And despite the fact that questions about total economic costs have been raised regularly by the most famous scientists of the past and present, this topic will never become irrelevant.

This is due to the fact that each manufacturer has its own formula for success, which can change from month to month. And it is impossible to find the only correct key that would suit absolutely everyone.

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 valuation of these costs is the cost of the firm. The most cost-effective method of production and sale of any product is considered to be the one in which the company's costs are minimized.

The concept of cost has several meanings.

Cost classification

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

Distribution costs classification

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

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

• Accounting costs- this is the valuation of the resources used in the actual prices of their implementation. The costs of the enterprise in accounting and statistical reporting act as 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 a 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 evaluation of the company's activities in the past, then the economist is also interested in the current and especially the predicted evaluation of the company's activities, the search for the most optimal use of available resources. Economic costs are usually greater than accounting costs. total opportunity cost.

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

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

Let's take an example. You are the owner of a small shop that is located in a room that is your property. If you didn't have a store, you could rent out this space, say, for $100 a month. This is the internal cost. The example can be continued. When you work in your shop, you use your own labor, without, of course, receiving any payment for it. With an alternative use of your labor, you would have a certain income.

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

Implicit costs cannot be equated with so-called sunk costs. Sunk costs- these are costs that are incurred by the company once and cannot be returned under any circumstances. If, for example, the owner of an enterprise incurred certain monetary expenses to ensure that an inscription with its name and type of activity was made 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 cost of the inscription.

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

The study and analysis of the costs of the organization is an important part of the ways to increase profits. In this regard, it is necessary to study costs in detail, to distinguish between such concepts as "costs", "costs" and "expenses". Although these concepts are similar in the generally accepted sense, their meanings vary depending on the scope.

Thus, the concept of "expenses" is more often used in accounting and tax accounting, and the term "costs" is applicable to the financial sector, planning and evaluating the effectiveness of an enterprise, that is, more applicable to management accounting.

The concept of "costs" is used in economic theory and in economic analysis.

There is a difference between the analyzed concepts, and their incorrect interpretation can cause significant violations in the analysis of the economic activity of the organization, in planning and managing financial and production processes. It is necessary to take into account the economic principles of formation of costs, expenses and expenses of the organization in order to exclude the subjective interpretation of certain categories. There are points of view according to which the difference between the concepts under study is far-fetched and due to the fact that the existence of synonyms allows avoiding repetition, and corresponds to the principle of the richness of the Russian language.

The study of various sources led to the conclusion that at present there is no unambiguous interpretation of these concepts.

The concepts of costs, expenses, costs and prime cost have always been under the close attention of domestic theory and practice. According to their content, these concepts have the same meaning - these are the costs of the organization that are associated with the implementation of certain operations.

As a result of reforming the legislative and regulatory framework for accounting and tax accounting, the content of these terms has changed significantly.

Expenses- these are the costs of enterprises, entrepreneurs, private producers for the production, circulation, marketing of products, which are expressed in monetary terms. The economic content of the definition of "costs" is similar to "costs", however, in practice in accounting, phrases with the word "costs" are more often used, in economic analysis - from "costs".

In accordance with IFRS, costs are resources that are consumed in economic activities that have not yet been recognized as expenses and are reflected in the balance sheet at the end of the year in the form of balances of work in progress, finished products, goods shipped, etc.

To designate the concept of expenses, PBU 10/99 should be used, since the Tax Code of the Russian Federation does not have a definition of the term, although the concept itself is present.

The Tax Code of the Russian Federation equates the terms "expenses" and "costs". Since there is no definition of the definition of "costs" in the accounting regulations, it would be logical to assume that these definitions are identical in practical activities in the field of accounting. Indirectly, this assumption confirms the use of this term along with the term "expenses" in terms of "material costs", "other costs" in paragraph 8 of PBU 10/99.

In the Chart of Accounts, 3 (approved by Order of the Ministry of Finance of the Russian Federation of October 31, 2000 No. 94n) is called "Production costs", that is, the term "costs" is used. This term is also used when characterizing the content of account 20 "Main production", which states that "the account is used to record the costs of manufacturing industrial and agricultural products ...".

In accordance with the Tax Code of the Russian Federation, an expense is a reasonable and documented cost incurred by a taxpayer.

Reasonable expenses- these are economically justified costs, the assessment of which is expressed in monetary terms.

Documented expenses are expenses that are confirmed by documents drawn up in accordance with the legislation of the Russian Federation, or documents that are drawn up in accordance with the customs of business turnover applied in a foreign state on the territory of which the corresponding expenses were made, and (or) documents indirectly confirming expenses incurred (including a customs declaration, a business trip order, travel documents, a report on the work performed in accordance with the contract).

Expenses- these are any costs, provided that they are incurred in the implementation of activities that are aimed at generating income.

At the same time, this definition, formulated in the Tax Code of the Russian Federation, is adapted for taxation purposes and does not fully reflect the essence of the costs at the enterprise.

Expenses- these are the explicit (estimated, actual) costs of the enterprise, the expense is a decrease in the funds of the enterprise or an increase in its debt obligations in the course of economic activity.

Costs mean the fact of the use of raw materials, materials, services. Only at the time of sale, the enterprise recognizes its income and the associated part of the costs-expenses. IFRS 18, as well as domestic PBU 9/99 and PBU 10/99, guide us to such an understanding of the previously mentioned terms. Expenses typically take the form of an outflow or reduction of an asset; are recognized in the income statement on the basis of a direct relationship between the costs incurred and receipts for certain items of income. This approach is called cost-to-income matching. In accounting, all income must be correlated with the costs of obtaining them, called expenses. So, expenses are the expenses of a certain period of time, documented, economically justified (justified), fully transferring their value to the products sold during this period. Unlike costs, expenses cannot be in a state of inventory intensity, they cannot be related to the assets of the enterprise. They are reflected in the calculation of the company's profit in the statement of financial results. The concept of "costs" is broader than the concept of "expenses", however, under certain conditions, they may coincide.

There is a group of expenses that does not have corresponding costs. These are the so-called miscellaneous expenses. If you try to characterize them in a generalized and simple way, then these are expenses incurred as a result of various miscalculations in the company's activities:

• shortages;
• damage and theft in the absence of those responsible;
• uncollectible receivables;
• fines and penalties for violation of the terms of contracts, etc.;
• various encumbrances on the part of the state in the idea of ​​maintaining mobilization capacities.

Costs in the period in which they are incurred may coincide with costs if one of the following conditions is met:

• income received as a result of their implementation;
• there will be no income, both in the reporting period and in future periods.

At the time of income recognition, costs are recognized as expenses. The main financial report reflecting the efficiency of the company is the income statement. And this report presents not costs (the reduction of which is the main goal of enterprises), but expenses. So, trying to draw some conclusions about costs on the basis of the cost data presented in the income statement, you can allow distortions and excesses. And both with a plus sign and with a minus sign.

Unlike expenses, expenses at the time of their recognition do not affect profit. If the implementation of costs was associated with an indicator of profit, one of the most important accounting processes would become meaningless - the calculation of the cost of production.

The costing product is the cost that is formed in production, but is recognized as an expense at the time of sale of products. Only at the time of sale can income, expenses and profit from the sale be reflected. In the course of the production process, these indicators cannot be recognized due to the fact that they characterize the process of circulation and do not yet “exist” before the sale of products. Production accounting is precisely based on the need to calculate the cost price without the influence of any profit and loss, that is, as stated in all accounting standards, "on the amount of actual costs."

In order to distinguish between the terms "costs" and "expenses", it is important to understand that the implementation of costs does not reduce the capital of the organization.

The term "costs", used in economic theory, means the total sacrifices of the enterprise associated with the performance of certain operations, including both explicit (accounting, settlement) and imputed (opportunity) costs.

Distribution costs in terms of their content are current costs that are spent every year in full and require annual advance payment. In their economic essence, they reflect the consumed part of the exploited resources (advanced cost).

Costs is a set of various types of costs for the production and sale of products as a whole or its individual parts. For example, production costs are the costs of material, labor, financial and other types of resources for the production and sale of products.

In addition, "costs" include specific types of costs: the unified social tax; losses from marriage; warranty repair, etc.

The concepts of "production costs" and "production costs" can coincide and be considered as identical only under certain conditions.

Obviously, costs and expenses appear as a result of essentially different business operations: in the case of costs, we are dealing with the acquisition of resources; in the case of costs, we are dealing with the use of resources. Therefore, costs and expenses can correspond to each other. For example, materials purchased by an enterprise in January were used in production in the same month. They may also not match. Moreover, this discrepancy can be both in time of occurrence and in magnitude.

If materials were purchased in January and used only in March, then costs and costs will differ in time of occurrence: costs incurred in January, and costs incurred in March.

The essence of the cost is that it shows, expressed in monetary terms, the total costs of a particular enterprise for the production and sale of products, the reimbursement of which is necessary for the implementation of simple reproduction. The difference between cost and costs is the completeness of the processes of production and circulation.

So, costs are related to these processes in general, regardless of their completeness and the nature of the connection with the production and sale of products, while the cost price means the completion of these processes.

Literature:

1. Garifullin K.M., Klychova G.S., Zakirova A.R. Development of cost accounting in the system of internal management of an agricultural organization. Kazan, 2010.
2. Klychova G.S., Zakirova A.R., Klychova A.S. Management accounting of agricultural land and internal reporting on their use // Bulletin of the Kazan State Agrarian University. 2013. V. 8. No. 4 (30). pp. 15-21.
3. Klychova G.S., Fakhretdinova E.N. Features of the formation of accounting information at small and medium-sized businesses in the agricultural sector // Bulletin of the Kazan State Agrarian University. 2009. V. 4. No. 4 (14). pp. 44-46.
4. Klychova G.S., Zyabbarov M.A. Some aspects of management accounting for the costs of fur fur farming // Accounting in agriculture. 2008. No. 10. pp. 38-42.
5. Klychova G.S. Cost management in fur farming in the concept of controlling // Bulletin of the Kazan State Financial and Economic Institute. 2007. No. 2. pp. 44-46.
6. Sytnik O.E. The economic essence of the categories "costs", "expenses", "costs" and their industry features / Sytnik O.E., Ledneva Yu.A. // Bulletin of the North Caucasian Federal University. 2009. No. 4. pp. 241-245.
7. Sytnik O.E. Accounting for costs and calculation of production costs in wine-making organizations / Sytnik O.E., Ledneva Yu.A. Saarbrucken, 2012.
8. Trubochkina M.I. Enterprise Cost Management: Proc. allowance. M.: INFRA-M, 2009. 319 p.
9. Frolov A.V., Koneva A.A. Features of the formation of centers of responsibility and costs in sheep breeding // Accounting in agriculture. 2009. No. 12. pp. 34-37.
10. Accounting (financial) accounting: accounting for production, capital, financial results and financial statements / Pipko V.A., Bulavina L.N., Kulish N.V., Kuznetsova V.I. M.: Finance and statistics, 2004.
11. On the approval of the Regulations on accounting "Income of the organization" PBU 9/99: Order of the Ministry of Finance of Russia dated 06.05.1999 No. 32n.

The authors:
Klychova G.S., Doctor of Economics, Head of the Department of Accounting and Audit
Khairullin R.R., Postgraduate student of the Department of Accounting and Audit
Kazan State Agrarian University Kazan, Russian Federation

In the analysis of the behavior of firms, the conditions for ensuring the maximum profitability of business activities are of the greatest importance. A profit-oriented firm is most typical of entrepreneurial activities.

The amount of profit to a decisive extent depends on the costs of the company, since profit is the company's revenue minus costs.

Therefore, the problem of costs is the initial one in the theory of the firm.

Costs are the costs of the company, expressed in monetary terms, associated with the acquisition of production factors and their use Sazhina M.A., Chibikov G.G. Economic theory. Textbook. S. 119.. There are several approaches to the consideration of production costs.

Firstly, the costs of production from the position of socio-economic relations are divided into the costs of society and the costs of the enterprise; the former include the costs of all living and materialized labor, reflected in the value of the goods. For the enterprise, they show its monetary costs for the spent means of production and wages.

Secondly, in market conditions, the company clearly divides accounting and economic costs. Accounting takes into account only the actual costs of production factors for the manufacture of products. Economic include accounting and implicit costs, i.e. costs of missed opportunities Galperin V.M., Ignatiev S.M., Morgunov V.I. Economic theory. Textbook for universities. SPb. 2010. S. 82-87 ..

Production costs are considered as a special kind of economic costs for any resources. In essence, economic costs are the payments that each firm is required to repay for the resources provided to other firms or households.

The payment for all these resources is the cost of production. Due to the fact that not all of these resources are actually paid, that is, some of them can be used by the enterprise as if for free, economists distinguish between explicit and implicit costs.

Explicit costs (external accounting) are cash payments for resources received from outside.

The accounting cost of production represents all the monetary costs required for production, including raw materials, wages, depreciation, rent, interest on loans, taxes, selling and administrative expenses, etc. The total amount of accounting costs is usually called gross production costs.

The value of any resource used in the production of goods and services is expressed in monetary terms, i.e. All payments must be recorded in accounting documents. That is why this method of estimating costs is called accounting, and the costs estimated using it are called accounting costs.

The main elements of accounting costs include the following expense items:

• - material costs - payment for raw materials, materials, fuel, energy, the cost of components and semi-finished products;
• - labor costs - wages of employees, as well as other payments provided for by employment contracts;
• - deductions for social needs - deductions according to the norms established by law to the social insurance fund, pension fund, employment promotion fund;
• - depreciation - deductions according to the norms established by law, reflecting the wear and tear of equipment, buildings;
• - other costs - commission payments to the bank for cash and banking services; interest on a loan, rent payments; payment for works and services rendered by other firms; taxes and fees included in production costs in accordance with the legislation Economic theory. Introduction to economics. Microeconomics: Textbook / Ed. B.I. Gerasimova, N.S. Kosova, V.V. Drobysheva. Tambov. 2009. S. 176 ..

A significant proportion of the costs are the costs associated with the acquisition and maintenance of such capital resources as machinery, equipment, buildings. Capital resources are also called fixed capital.

Fixed capital is a part of the capital of the enterprise, which is used during many production cycles and the value of which is included in the costs and in the price of production, not entirely, but in parts.

The use of these resources in economic activity has a number of features. Unlike such production resources as fuel, energy, materials (i.e., objects of labor), capital resources are spent over many production cycles, i.e. function for years, but are subject to constant wear and tear.

Implicit (internal) costs are the costs associated with the use of the company's own resources. Unlike explicit, these costs are not paid, are not reflected in the financial statements, they are hidden, i.e. These are the company's own resources used in production. The value of these costs is determined by the income that these resources could bring with their most profitable alternative use. See Galperin V.M. etc. Decree. sochin. pp. 82 - 87..

The existence of implicit costs can be illustrated by the example of the activities of a firm that uses its own and rented productive buildings, equipment, machines. The company pays rent for the use of foreign capital, which includes interest and depreciation. Since an alternative use of the capital owned by the company, for example, renting it out, would bring income in the form of interest, the company necessarily takes into account the costs of using equity. They represent a percentage of capital.

Costs are viewed from another angle. Part of the economic resources used may belong to the firm, be owned by its owners. The other part of the resources the firm acquires from suppliers who are not the owners of the firm. Thus, the firm may own most of the productive premises and equipment, vehicles, etc. At the same time, the firm buys raw materials, fuel, energy, labor services, and so on. The use of any resource is associated with costs. The cost of using one's own land is called rent, or internal rent; the costs of using the entrepreneurial abilities of the owner of the enterprise in the same enterprise are called normal profit; the cost of using the company's production buildings, equipment and other elements of real capital is called interest.

Thus, economists include in the economic costs of production all costs - external and internal, including rent, normal profit and interest in the composition of internal costs in order to attract and use resources in the activities of a competitive enterprise. Accounting costs are equal to the total amount of external costs. From the above definitions, it follows that economic costs are greater than accounting costs by the value of the firm's internal costs.

There are also so-called sunk costs that the firm has spent but cannot recover. Sunk costs do not influence the firm's decisions about its actions in the future. But it is possible to evaluate the previous decisions that led to the emergence of sunk costs.

Opportunity cost is the cost of lost opportunities, representing the value of other benefits that could be obtained in the most profitable of all possible uses of this resource.

Opportunity costs are very difficult to imagine as a certain amount of rubles or dollars. This is because in a diversified production environment and a rapidly changing economic environment, it is difficult to choose the best way to use available resources. In a market economy, this is done by the entrepreneur himself, as the organizer and initiator of production. Based on his intuition and experience, the entrepreneur determines the effect of a particular direction of the use of resources. At the same time, the revenue and the amount of income from missed opportunities is always hypothetical.

There are also costs in the short and long run. In the short run, the company's costs are divided into fixed and variable. In the long run, all costs are variable.

Every organization seeks to maximize profits. Any production incurs costs for the purchase of factors of production. At the same time, the organization seeks to achieve such a level that a given volume of production is provided with the lowest costs. The firm cannot influence the prices of inputs. But, knowing the dependence of production volumes on the number of variable costs, it is possible to calculate the costs. Cost formulas will be presented below.

Types of costs

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

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

The second group is further divided into several elements.

Total expenses

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

Total Costs (TC) is the total cost of producing a given volume of products. In the short run, a number of factors (for example, capital) do not change, and part of the costs does not depend on output volumes. It is called total fixed costs (TFC). The amount of cost that changes with output is called total variable cost (TVC). How to calculate total costs? Formula:

Fixed costs, the calculation formula for which will be presented below, include: interest on loans, depreciation, insurance premiums, rent, wages. Even if the organization does not work, it must pay rent and debt on the loan. Variable costs include salaries, materials, electricity, etc.

With the growth of output volumes, variable production costs, the calculation formulas of which are presented earlier:

• grow proportionally;
• slow down growth when the maximum profitable volume of production is reached;
• resume growth due to the violation of the optimal size of the enterprise.

Average costs

Wanting to maximize profits, the organization seeks to reduce the cost per unit of product. This ratio shows such a parameter as (ATS) 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 market conditions.

Relationship

Marginal cost must be less than the total average cost (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 marginal costs. It is impossible to constantly increase the volume of production. This is the law of diminishing returns. At a certain level, variable costs, the formula for which was presented earlier, will reach their maximum. After this critical level, an increase in production even by one unit will lead to an increase in all types of costs.

Example

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

Without being engaged 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 amount of variable costs will be zero. With an increase in production by 1 piece, VC will be: 130 - 60 \u003d 70 rubles, etc.

Marginal costs are calculated using the formula:

MC = ∆TC / 1 = ∆TC = 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 cost

Accounting costs are the cost of the resources used at 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:

• the salary;
• equipment rental costs;
• fare;
• payment for materials, bank services, etc.

Economic cost is the cost of other assets that can be obtained from an alternative use of resources. Economic costs = Explicit + Implicit costs. These two types of expenses often do not coincide.

Implicit costs are payments that a firm could receive if it were to use its resources more favorably. If they were bought in a competitive market, then their price would be the best of the alternatives. But pricing is influenced by the state and the imperfection of the market. Therefore, the market price may not reflect the real cost of the resource and may be higher or lower than the opportunity cost. Let us examine in more detail economic costs, cost formulas.

Examples

The 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 in the end the entrepreneur suffers a net loss. It, together with net profit, is recorded in the documents and refers to explicit costs. If the entrepreneur were to work from home and earn an income that would exceed his net profit, then the difference between these values ​​\u200b\u200bwould be an implicit cost. For example, an entrepreneur receives a net profit of 15 thousand rubles, and if he were employed, he would have 20,000. In this case, there are implicit costs. Cost formulas:

NI \u003d Salary - Net profit \u003d 20 - 15 \u003d 5 thousand rubles.

Another example: an organization uses in its activities a room that belongs to it by right of ownership. Explicit costs in this case include the amount of utility costs (for example, 2 thousand rubles). If the organization leased this premises, it would receive an income of 2.5 thousand rubles. It is clear that in this case the company would also pay monthly utility bills. But she would also receive a net income. There are implicit costs here. Cost formulas:

NI \u003d Rent - Utilities \u003d 2.5 - 2 \u003d 0.5 thousand rubles.

Refundable and sunk costs

The entry and exit fees for an organization are called sunk costs. No one will return the costs of registering an enterprise, obtaining a license, paying for an advertising campaign, even if the company ceases to operate. In a narrower sense, sunk costs include the costs of resources that cannot be used in alternative ways, such as the purchase of specialized equipment. This category of expenses does not apply to economic costs and does not affect the current state of the company.

Costs and price

If the organization's average cost is equal to the market price, then the firm earns zero profit. If favorable market 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 division of labor (MRI)

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

One production process cannot be divided into several separate ones. At the same time, such a division will allow uniting separate industries and territorial complexes, establishing a relationship 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 encourage countries to participate in MRI:

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

Each participant finds economic benefit in the process itself.