The Costs are classified according to their purpose. In theory and in practice a clear distinction between them acts as a determining factor of performance. At all stages of management is grouping the costs, it creates the cost of goods. Along with this, by identifying appropriate sources of funds. Let us further consider what are the ongoing costs of the enterprise.
The Expenses of the economic entity are classified into three categories. In particular, there are:
Directly with the issue and sale of the products associated capital and operating costs. They have different effects on the activity of the economic entity, but equally important to achieve the goals.
Charges this category represents the largest share of all costs of the subject. They include tools aimed at raw material supply, financing of fixed assets, wages and so on. Current expenses are returned at the end of the release cycle and distribution of goods are recognised in revenue.
The Current production costs are recorded in the accounting documents. As the key objectives of cost accounting are:
The Current expenses are accounted for on the basis of a number of key assumptions. First, the disclosure must comply with the objectives of improving the activities of the entity. To ensure the comparability of different costs of developing a single nomenclature articles. It gives the opportunity to cover the various ongoing costs. Production, marketing, acquisition of materials, raw materials, etc., thus reflected using a common notation that is understandable for all units. The range of articles is also used when the distribution of costs by classification groups.
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Every economic entity needs to assess the effectiveness of current expenditures. The estimation is performed from the point of view of rationality and the availability of opportunities for savings in this and upcoming periods. Current costs are optimal if they improve the final result – continuing to increase turnover and profits. To implement this task, you must:
This classification has important practical significance. Variables current expenditures decrease or increase proportionally to the production volume. Provided by the purchase of materials and raw materials, energy consumption, transportation, trade commissions and other costs. Ongoing operating costs from the dynamics of production volume are independent. This category include depreciation charges, interest on loan, rent, utilities, administrative costs and so on. There is also a separate category of fixed(variable) costs. Changing them is not directly proportional to production volumes.
The Cost per unit product can be calculated by the method of absorption. It involves adding up all costs for the production. Information about the cost serve as a basis for determining the amount of work in progress, financial results, volumeinventory. It allows you to analyze the profitability of individual products, groups, and performance units. In accordance with the result of the decision on the appropriateness of the subsequent issue or work. The increased cost is also used in the pricing process, especially when determining an adjustable value.
Previously, the method of absorption were widely circulated in the planned economy. With it was made the administrative decision at full load capacity and the lack of price competition. Currently the situation has changed. In particular, the capacity utilization of the enterprise is determined by the demand for the product. He, in turn, largely depends on the price. To determine the cost value for a given volume of production can only be at the end of the reporting period. Meanwhile, the leader needs the figure on the stage of assortment planning.
From the above it follows that the key shortage calculation by total absorption is the lack of connection between costs and production volume. In addition, the following disadvantages:
The above disadvantages, it is possible to avoid if to use the method of separation of costs into fixed and variable. In this case, the inventory value will include only the last. While fixed costs are expensed in the period. As a result, the gain derived from the changes of volume of reserves.
The Costs that form the cost are divided according to economic content at:
The Structure of these groups depends on different factors. In particular, it is influenced by the nature of the manufactured products and used materials and raw materials, technical level, forms of organization, allocation of production, conditions of supply and sale of goods.
In all economic sectors, these costs constitute the major share of the cost. To inventory include finished products, raw materials, energy, fuel and so on. Some of these objects are processed or Assembly. This, in particular, relates to purchased from other companies semi-finished products and materials. The release of energy and fuel mix is caused by their economic value. For the material costs also include the cost of packaging, containers, spares, tools. Resource estimation is based on the purchase price (excluding VAT), markups, commissions, foreign trade, supply and intermediary entities, customs duties and a number of other indicators. From the material cost excludes the cost of the stock coolants, semi-finished products, raw materials, which are formed in the process of production and partially or completely lose their consumer properties and, therefore, then cannot be used.
The Expenses reflect the participation of human labor in the formation of cost. These costs include salaries of core personnel and employees who are not in the state, but are involved in activities for the production of products. Remuneration consists of:
Deductions for social. needs are a form of redistribution of the national income to Finance social needs. Funds are allocated to the relevant extra-budgetary funds and are earmarked. Depreciation included in cost of sales in the amounts which are calculated in accordance with the balance value of fixed assets and existing norms. Depreciation is charged as to its own facilities and leased (unless otherwise determined in the agreement). In other costs there are a variety of costs. These include, in particular, fees and taxes, contributions to the funds, the amount of insurance premiums, payments for pollution of nature, the payment of interest on the loan, representation and travel costs, payment of the works connected with certification, remuneration for rationalization, invention and so on.
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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."
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