Enterprises that are in no way connected with the production process. Maintaining non-production costs at a minimum level is one of the main tasks of a manager.
Essence and classification of non-production expenses
The reasons that most often lead to an increase in non-production costs are the discrepancy between the qualifications of existing personnel and the level that the company has achieved as a result of constant progress, delays in making and implementing management decisions, and a permissive attitude towards the management process. As a rule, any non-production costs can be minimized at any stage - the manager only needs to realize the need to take action (for example, decide to fire old employees).
All non-production costs can be divided into three main groups: personnel costs, transport costs and others. Special cases of non-production expenses are:
- Travel expenses for senior executives.
- Waste of office supplies (theft is also common).
- Use of company-paid telephone services for personal purposes.
- Payment for additional traffic when the basic package is not enough due to the employee using the Internet for other purposes.
Ways to reduce non-production costs
The manager can minimize all non-production costs associated with personnel using the following measures:
- Control system integration. The need for any non-production needs must be explained using a memo. There are several aspects to this. Firstly, it is important for the manager not to “go too far,” that is, not to bureaucratize the process to such an extent that sending reports and memos prevents staff from performing basic duties. Secondly, you need to remember that the control system is also a non-production cost, therefore, its integration should not be expensive.
- Elimination of universality and the desire for specialization. The enterprise should not have employees who combine two positions that are not related to each other. In this way, a manager can save on wages, but does not take into account that due to universal employees, labor productivity most often suffers greatly.
- Carrying out inventories on an ongoing basis. It is important here that a liability agreement is signed with all employees, regulating the process of distribution of damage. Otherwise, even if the manager identifies the damage, there will be no one to recover it from.
Non-production costs for transporting resources and storing them can be reduced by the following methods:
- Agree with another company located geographically close to carry out joint purchases - as a result, transport costs will be halved.
- Review your resource accounting and storage policies in order to minimize tax payments (if necessary, you should contact a tax consultant).
- Master a tool such as delivery. In this case, storage costs will be borne directly by the issuer of the futures, and the purchasing company will receive the resources exactly when needed and at a pre-agreed price.
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Production costs are materialized costs and are included in the cost of production. They include: direct material costs, direct labor costs, and general production costs.
● Direct material costs
These costs are reflected in inventories of materials, work in progress, and finished products (goods) in the organization’s warehouse. They are incoming, subject to inventory, and are assets of the organization that should bring benefits in future reporting periods. In management accounting they are called “inventory-intensive”.
Direct material costs are the costs of raw materials and basic materials, their cost is directly transferred to certain types of products. They are variables, their value changes in direct proportion to the volume of production.
If the cost of materials cannot be directly attributed to a specific type of product, then these materials are accounted for as auxiliary materials, classified as indirect material costs and included in general production costs. Each organization, based on the specifics of the production process, independently decides which materials to classify as basic and which to include as auxiliary.
● Direct labor costs
Direct labor costs include all costs of paying labor directly involved in the manufacture of products. These include wages for machine operators and key workers. Direct labor costs are variable; their value changes in direct proportion to production volume.
Labor costs for shop management personnel (foremen, managers, technologists), support personnel cannot be directly attributed to a specific type of product, therefore they are indirect (indirect), therefore they are considered as general production costs. The division of labor costs into direct and indirect depends on the specific situation. For example, additional wages for key workers and payment for overtime work are usually classified as indirect costs.
● General production expenses
General production costs arise in production units - sections, workshops, production facilities, and processing areas. They are closely related directly to production. These include general workshop costs for organization, maintenance and production management.
General production expenses are divided into the following groups:
1) costs of maintaining and operating equipment:
Depreciation of equipment and vehicles;
Routine maintenance and repair of equipment;
Energy costs for equipment;
Services of auxiliary production for maintenance of equipment and workplaces;
Wages and social contributions for workers servicing equipment;
Expenses for in-plant transportation of materials, semi-finished products, finished products;
Other expenses associated with the use of equipment;
2) general shop management costs(costs of production management; costs associated with the preparation and organization of production; maintenance of the management apparatus of production units; depreciation of buildings, structures, production equipment; maintenance and repair of buildings, structures, equipment; costs of ensuring normal working conditions; costs of career guidance and training ).
Their main features are:
1) complex nature (reflect all economic elements of costs);
2) are planned and taken into account at the places of their occurrence;
3) controlled by the budget-estimate method;
4) distributed indirectly between types of finished products and work in progress;
5) these expenses are first distributed among production departments according to the decision of the accountant. The indicator that most closely matches the overhead costs of each production unit is selected as the distribution base. The distribution base remains unchanged over a long period of time. In practice, the following is taken as the distribution base:
a) working time of production workers (man-hours) - reflects the costs of direct labor;
b) wages of production workers, if they occupy a larger share in general production costs;
c) machine hours, if processing time takes up a large proportion;
d) direct costs, if the cost of basic materials and the basic wages of production workers makes up a large share;
e) cost of basic materials;
f) the volume of products produced in physical or value terms, if the division produces one type of product, without taking into account the labor intensity of products produced by different divisions;
g) standard rates, calculated for the enterprise as a whole, or for each division separately (used in cases where the divisions spend the same time on all work).
General production costs can be either conditionally variable or constant. Conventionally, variable general production costs are:
1) expenses of energy resources necessary to drive production equipment, machines, mechanisms;
2) expenses for routine maintenance of equipment and workplaces;
The size of these costs largely depends on the volume of production.
Other manufacturing overhead costs are fixed. These include: rent, insurance premiums, depreciation, etc.
Direct labor costs and general production costs form a group of added costs.
cost price depreciation cost
Cost is all costs (expenses) incurred by an enterprise for the production and sale (sale) of products or services.
A more complete definition of cost: “cost is the valuation of the natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources and other costs for its production and sale used in the production process of products (works, services”).
All costs included in the cost of production can be classified on various grounds, in particular, according to efficiency, they are divided into productive and non-productive.
Productive costs are the costs of producing high-quality products (works, services) with a certain organization of production. These expenses are planned, they can be planned and compared with income.
Unproductive expenses are unplanned expenses (they do not generate income), resulting from imperfect organization of production (such as losses from defects, downtime, costs for overtime work).
Within the framework of unproductive costs, in turn, several groups can be distinguished:
1. costs caused by overproduction, i.e. more products are produced than can be sold. Overproduction is caused by shortcomings in product planning, inadequate understanding of customer needs, and large production backlogs. As a result, a lot of resources, time, etc. are wasted. (which ultimately leads to monetary costs), but there is no return (revenue);
2. costs due to defects and rework. Defects and rework, that is, incorrigible and correctable defects, are harmful from the point of view of generating unproductive costs for the same reason - resources are spent on them, and there is no return (or it is, in the case of a correctable defect, relatively small);
3. costs associated with excessive movement and movement of materials, parts, tools, due to their irrational location. For example, a worker is forced to go to the utility room to get the necessary tool, instead of reaching out and taking it from a nearby rack; workpieces are constantly transferred from one end of the workshop to the other, rather than moving them sequentially to a minimum distance between sections. Such movements and movements add no value to the final product and are therefore simply useless;
4. costs due to the availability of inventories. Excess inventory “deads” working capital and also requires additional storage costs. The reason for their occurrence is shortcomings in planning needs, the tendency to purchase “in reserve”, the presence of “unliquid stock”;
5. costs caused by unnecessary processing. The latter means adding products of such properties and qualities that are not in demand by the consumer and for which he is not willing to pay;
6. costs associated with waiting, that is, essentially with downtime. Downtime for an enterprise means lost profit. They arise for various reasons, such as the lack of availability of external and internal suppliers, lengthy equipment readjustments, repair work on equipment, poor planning of production capacity utilization, etc.
To eliminate or minimize each of the listed types of unproductive costs, various methods are used depending on the cause of the losses.
Bibliography
1. Enterprise Economics / Ed. A.L. Nikitina. - M.: Delo, 2009.
2. Faltsman V.K. Fundamentals of economics and enterprise management. - M.: TEIS, 2007.
3. Zaitsev N.L. Economics of an industrial enterprise: Textbook. - M.: Infra-M, 2007.
4. Yarkina T.V. Fundamentals of enterprise economics. - Taganrog: TRTU Publishing House, 2007.
In modern economic conditions, it is important to reduce losses and unproductive expenses in enterprises and associations by identifying shortcomings in the organization of the production process and sales of products.
Unproductive expenses are unplanned (forced) actual material costs of an enterprise that arise as a result of violations in its economic mechanism, committed both by the enterprise itself and by other economic bodies, which negatively affect the final results of operations. The main causes of violations in the economic mechanism:
on-farm - consist of shortcomings in the organization of production and the labor process, ensuring the release of high-quality products, logistics of production, conditions and procedures for fulfilling one’s own contractual obligations, organizing the shipment and sale of finished products (goods) to consumers, work to bring to justice those responsible in the assumption of unproductive expenses by the enterprise;
external - consist of illegal actions of suppliers, transport organizations and other counterparties, expressed in non-fulfillment or improper fulfillment of contractual obligations assumed for the logistics of the enterprise or the sale (shipment) of finished products (goods).
Unproductive expenses and losses include:
Marriage losses.
Losses attributed to non-operating expenses:
Non-productive costs attributed to production costs:
losses from downtime due to internal production reasons;
losses from underutilization of parts, assemblies and technological equipment;
losses from writing off shortages and damage to inventory items in the absence of those responsible or the recovery of which was refused by the court.
Other non-productive expenses:
payments to employees released from the enterprise due to its reorganization or liquidation, as well as due to a reduction in the number of employees and staff.
One of the main tasks of accounting for production costs is the modern and reliable identification and determination of unproductive expenses and losses incurred from defects, downtime, shortages and damage to material assets. Accounting information also allows us to establish the reasons and those responsible for the irrational use of enterprise funds.
Marriage accounting:
Rejects represent unproductive costs of production resources. It reduces the output of suitable products and increases their cost.
Defects in production are considered to be products (products), semi-finished products, assemblies, parts and structures that do not meet established standards or technical specifications in quality and cannot be used for their intended purpose or are used only after additional costs to eliminate existing defects.
Requirements for product quality are increasing, so technical control departments and other services of the enterprise are faced with the task of timely identification, analysis and prevention of defects. In particular, work is being done to prevent defects through the introduction of an integrated product quality management system and efficient use of resources.
In the effective fight against marriage, a properly organized accounting of losses, identifying the causes and culprits is of great importance. An important role is given to its operational accounting at the places of occurrence, which is carried out by the technical control department of the enterprise.
In all other cases, defects identified in production must be documented. If a defect is detected, employees of the technical control department make appropriate notes in the primary documents for recording production (work orders, reports, route sheets).
The most common document for registering a defect is an act (notice of defect), in which employees of the technical control service indicate the name of the rejected product, its technical number, the number of the operation in which the defect was detected; codes for the type and reason of marriage; the perpetrators of the marriage; cost of marriage; amounts to be recovered from the perpetrators; mark from the receiving workshop or warehouse regarding acceptance of rejected products.
The marriage certificate contains a special section for calculating marriage by items of direct costs. The act is written out in two copies and signed by the controller of the technical control department, the foreman and the head of the section or workshop. One copy, along with defective products, is sent to the defect storeroom, the other to the dispatch bureau (production department), and then to the accounting department. The act is approved by the head of the enterprise, who decides on the procedure for writing off losses from defects - at the expense of the guilty parties or at the expense of production.
Its classification is of great importance in organizing the accounting of defects and determining losses from them by places of occurrence, causes and culprits.
Based on the nature of the identified defects, the defect is divided into correctable and irreparable (final). Correctable defects include parts, assemblies, products that can meet the requirements of standards or technical specifications after correction of defects, if such correction is technically possible and economically feasible. If it is impossible to correct the defect or the costs of correction will exceed losses from defects, these parts, assemblies, products, and work are classified as final defects.
Based on the location of detection, a distinction is made between internal defects, detected at any production site before shipment to the consumer, and external defects - detected at the consumer (buyer) during the acceptance or use process.
In addition, marriage is classified according to types, causes and culprits of its occurrence.
All transactions involving defects are accounted for on the synthetic active calculation account 28 “Defects in production”. The debit of this account reflects: for irreparable defects - expenses, the cost of rejected products, and for correctable defects - expenses associated with its correction. On the credit side, the invoices reflect amounts that partially reduce losses from defects: deductions from those responsible for the defects (enterprise employees, suppliers of raw materials, etc.) and the cost of returnable waste at the price of possible use, as well as the cost of irreparable defects attributed to the costs of the main production.
The difference between debit and credit turnover, i.e. preliminary balance on account 28 represents losses from defects at the end of the month included in the cost of production under the costing item of the same name. Thus, account 28 is closed by transferring the balance (the amount of losses from defects) to the cost of production.
Analytical accounting on account 28 is carried out for individual workshops, types of products, expense items and culprits in statement 14 “Losses from defects” when using the journal-order form of accounting.
Statement 14 is intended to account for identified losses:
from the shortage of work in progress minus its surplus;
from write-off of parts and assemblies from production due to the modernization of manufactured products;
from defects in production, including losses associated with damage to semi-finished products during equipment setup.
The cost of defects and losses from it are reflected in statement 12 “Costs by shops” and journal-order 10, and compensation for losses is in journal-warrant 10/1 when using the journal-order form of accounting.
Statement 12, opened for the month, takes into account production costs by workshop; to reflect costs for individual workshops, the loose leaf sheets provided for the statement are used. Accounting for the costs of the main production shops is carried out in separate statements separately from the costs of the auxiliary production shops. With a significant number of workshops, statements can be opened for separate groups.
In accounting, losses from marriage reflect:
Account correspondence
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1.1. Costs for correcting internal and external defects: material costs, including the cost of work and services, by third-party enterprises, as well as service industries and farms; accruals for workers' wages and reserve amounts for vacation pay; deductions from workers' wages; travel expenses (representation when rejecting products, performing work to correct defects at the consumer); transportation costs associated with correcting external defects at the location of buyers; part of general and general production expenses attributable to the cost of defects; 1.2. Cost according to the standard (planned) cost of internal final product defects 1.3. Uncompensated expenses for defects related to the quality and range of supplied materials (amounts of unsatisfied arbitration claims) 1.4. Amounts of transportation costs reimbursed to customers in connection with the return of defective products |
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2. Amounts allocated to reduce losses from defects 2.1 Cost of material assets at prices of possible use or sale received at the warehouse of secondary resources and received from disassembling rejected products 2.2 Amounts withheld from the wages of those responsible for the marriage in accordance with current legislation to compensate for losses from the marriage |
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3. Write off losses from defects as production costs Total amounts of losses from defects in main and auxiliary proceedings (cost of final defects plus expenses for correctable defects minus amounts attributable to reducing losses from defects |
Accounting for losses from downtime:
As a result of technological and organizational problems, downtime of workers, machines and mechanisms occurs. They represent an unproductive loss of funds and labor due to underutilization of equipment and labor and shortfall in production for this reason. Downtime increases production costs, reduces profits, and damages the enterprise. Therefore, taking into account downtime, analyzing their causes and those responsible for their occurrence is of great importance in identifying reserves for increasing labor productivity and increasing production output.
Losses from downtime - unproductive costs of raw materials, materials, fuel, payroll and related expenses as a result of unplanned shutdowns of individual machines, workshops or entire production.
Downtime at enterprises is divided into all-day and intra-shift and occurs for external and internal reasons. External ones include downtime caused by delays in the supply of electricity by energy supply organizations, water, steam, as well as raw materials, materials, fuel and spare parts by suppliers; internal downtime occurs due to the fault of the enterprise itself due to various production and organizational problems: inconsistency, violation of production and technological discipline ( lack of technical documentation, untimely delivery of tasks, absence or malfunction of tools and devices). Those responsible for downtime include: suppliers; departments and services of the enterprise; workshops of enterprises; administration; workers.
The enterprise should develop a list of causes and culprits of downtime. In all cases of worker downtime for more than 15 minutes, a simple sheet is issued, which indicates not only the names and personnel numbers of the workers, the types and numbers of idle machines, the beginning, end and duration of the downtime, but also the codes of its causes and culprits in accordance with the nomenclature developed at the enterprises .
When a workshop, site, individual production or enterprise as a whole is stopped, an act is drawn up, which explains the reason in detail and lists all the costs and losses caused by the downtime.
Downtime losses include:
wages with deductions for production workers for downtime;
additional payment to workers employed in other jobs;
the cost of raw materials, materials, fuel, energy unproductively spent during downtime;
share of costs for the maintenance and operation of machinery and equipment.
Such losses resulting from external reasons should be taken into account as part of general business expenses, and internal - in general production expenses under the item “Losses from downtime.”
Depending on the duration, downtime is divided into intra-shift and whole-shift. Intra-shift downtime is issued with a sheet about downtime, and in the working time sheet they are additionally marked with the letter B. Whole-shift downtime is most often caused by external reasons and covers workers of the entire section or workshop. These downtimes are marked in the report card with the letter P and are documented by issuing a report with a list of workers participating in the downtime.
Downtime can be used, i.e. During this period, workers receive new tasks and are assigned to other jobs. Work is formalized by issuing work orders in accordance with the procedure for payment at piece rates or with preservation of average earnings. The downtime sheet indicates the work order number and the time worked.
In accounting, accounting for downtime is reflected:
Account correspondence
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Cost of fuel at accounting prices, consumed during downtime |
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Cost of energy (purchased and own generation) consumed during downtime |
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Amounts of losses from downtime not compensated by the culprits for claims not satisfied by arbitration or court for deliveries, transportation, energy supply, and violations of other economic relations |
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Wages with deductions accrued during downtime or forced production stops for various reasons (internal and external) |
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Additional payment for the time spent performing less skilled work (additional payments up to average earnings, payments of inter-grade differences) |
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Losses from downtime due to external reasons not compensated by the culprit are reflected. |
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A claim has been filed against the guilty organization. |
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The claim was satisfied and amounts were received from the culprit. |
Accounting for losses from damage and shortage of inventory items:
In accordance with current legislation, shortages and losses from damage, theft of material resources, including work in progress and finished products, due to the fault of materially responsible persons and officials are subject to compensation. There may be cases when the perpetrators are absent or the court refuses to recover from the perpetrators. Then shortages and losses from damage to material assets and unfinished production are considered unproductive expenses.
The presence of losses from spoilage and shortages is the result of irrational use of inventory, ineffective organization of supply and warehousing, lack of weighing instruments and measuring containers and is determined by conducting an inventory.
Account correspondence
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A shortage of inventories has been identified |
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The amount of shortages is reflected within the limits of natural loss norms |
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Reflects the amount to be recovered from the guilty parties for missing or damaged valuables |
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The difference between the recovered and book value of the shortage or loss is written off as non-operating income |
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Reimbursement of amounts by the guilty parties |
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The difference between the collected and book value is written off as payment is received. |
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The actual cost of destroyed and lost assets due to natural disasters and fires is reflected |
Other non-productive expenses:
The level of product costs is significantly influenced, along with losses from defects, downtime, shortages and damage to valuables, and other unproductive expenses:
benefits paid on the basis of court decisions as a result of loss of ability to work due to work-related injuries;
payments to employees released from the enterprise in connection with its reorganization and liquidation, as well as in connection with the reduction of employees and staff.
Liquidation of an enterprise is carried out by decision of the owner or a body authorized by him, or by a court decision in the following cases:
declaring him bankrupt;
systematically carrying out activities that are contrary to the goals of the enterprise, either without proper permission (license) or prohibited by law;
if the acts on the establishment of the enterprise are declared invalid.
A reduction in the number or staff of employees can occur either through an actual reduction in work or during various technical and organizational measures (introduction of new equipment) that make it possible to reduce the number of employees, although the volume of work remains unchanged or even increases.
Due to a reduction in numbers, workers are usually laid off, and with staff reductions, those workers whose positions are included in the staffing table are fired.
Upon termination of an employment contract due to the liquidation of an enterprise or the implementation of measures to reduce the number (staff) of employees, severance pay is paid in the amount of at least three times the average monthly salary. The amount of the benefit increases depending on the length of service with a given employer in the manner and under the conditions provided for by the collective agreement (agreement).
Severance pay is paid regardless of the fact that the employee has been warned about the upcoming dismissal.
Employers bear, in accordance with the law, financial liability for damage caused to employees by injury or other damage to health associated with the use of their labor duties.
Evidence of the employer’s guilt can be an industrial accident report, a court verdict or decision, a prosecutor’s resolution, an inquiry or preliminary investigation body, a decision to impose an administrative or disciplinary penalty on the perpetrators and other documents.
Compensation for damage consists of payment to the victim of monetary amounts in the amount of earnings (or part thereof) that he lost due to loss of ability to work or its reduction, minus a disability pension due to work injury, as well as compensation for additional expenses caused by damage to health.
The amount of compensation for damages associated with the loss of the victim’s previous earnings or a decrease in it due to a work injury is determined as a percentage of this earnings, corresponding to the degree of his loss of ability to work.
If the work injury occurred not only through the fault of the employer, but also through the gross negligence of the employee himself, then the amount of compensation for damage should be reduced depending on the degree of guilt of the victim, or compensation for harm should be refused. Severance pay amounts are not subject to taxation and are not subject to collection of debts.
Account correspondence
In addition to unproductive expenses and losses that negatively affect the cost of production, we can also distinguish losses that reduce the balance sheet profit of the enterprise and non-operating losses.
Accounting for non-operating losses:
In the process of economic activity, an enterprise, along with profits, may also have unexpected losses from operations not related to the production and sale of products (works, services), fixed assets, inventory, intangible and other assets. These losses are recorded directly on synthetic account 92 “Non-operating income and expenses” in correspondence with different accounts.
Losses attributable to profit (non-operating losses) include:
losses from downtime due to external reasons not compensated by the culprits;
awarded or recognized fines, penalties, penalties and other types of sanctions for violation of the terms of business contracts, as well as expenses for compensation of losses caused;
losses from writing off receivables for which the statute of limitations has expired;
uncompensated losses from natural disasters.
The reasons for the formation of overdue receivables are: lack of funds from the payer, return of payment requests by the bank without payment due to financial control, refusal to accept payment requests.
Debtors and creditors include organizations for non-commercial transactions, including: transport organizations that conduct payments related to the use of associated transport for the transportation of goods; depositors, organizations and persons in whose favor deductions are made on the basis of executive documents; apartment renters and people living in dormitories; tenants of non-residential premises; parents of children admitted to child care institutions. Uncollectible accounts receivable are written off by decision of managers either to the enterprise's losses, or at the expense of net profit or the reserve for doubtful debts.
Doubtful debt is considered to be an enterprise's receivables that are not repaid on time and are not secured by appropriate guarantees. The formation of this reserve is made after an inventory of accounts receivable.
A significant part of unproductive expenses consists of penalties, the need to pay which is caused by failure to fulfill obligations under contracts for the supply of finished products.
Fines, penalties, penalties can be received:
for failure to fulfill delivery obligations;
for late payment for delivered products;
for the delivery of incomplete and low-quality products.
Account correspondence
When identifying losses and unproductive expenses, it is necessary to promptly establish the reasons and specific culprits to compensate the enterprise for damage and prevent similar losses in the future.
The collection and processing of information in management accounting is carried out in order to meet the needs for solving various problems. Depending on the assigned tasks, approaches to the procedure for collecting and processing information are also formed. An important place in the management accounting system is occupied by the concept of costs and their classification, which are one of the main objects of management accounting.
In management accounting, the purpose of any classification of costs should be to assist the manager in making correct, rationally based decisions. When making decisions, the manager must know the degree of influence of costs on the level of cost and profitability of production. Therefore, the essence of the cost classification process is to highlight that part of the costs that the manager can influence.
In accordance with the areas of cost accounting in management accounting, the following classification groups of costs are distinguished (Fig. 2.1).
Rice. 2.1. Classification of costs in management accounting
Let's consider classification of costs to determine the cost, estimate the value of inventories and profit received.
1. Accounting for the total amount of production costs is organized by economic elementscosts, and accounting and costing certain types of products, works and services – by cost item. This type of classification is determined economic content expenses incurred.
The economic element is a homogeneous type of cost that cannot be decomposed into any component parts. Cost estimates are made based on economic elements. There are five cost elements:
– material costs (minus the cost of returnable waste);
– labor costs;
– contributions for social needs;
– depreciation of fixed assets;
– other costs.
To control the composition of costs at the places where they were incurred, it is necessary to know not only what was spent in the production process, but also for what purpose these costs were incurred, i.e. take into account costs by area in relation to the technological process. Such accounting allows you to analyze the cost by its components and for some types of products, and establish the volume of costs of individual structural divisions. The solution to these problems is carried out by applying the classification of costs according to costing items. The list of costing items, their composition and methods of distribution by type of product are determined in accordance with industry guidelines, based on the characteristics of the technology and organization of production by the enterprise itself. However, there is an approximate standard nomenclature of cost items for various industries:
1. Raw materials and materials
2. Purchased products, semi-finished products and third-party services
3.Returnable waste (subtracted)
4. Fuel and energy for technological purposes
5.Transportation and procurement costs
Total: Materials
6. Basic wages for production workers
7.Additional wages for production workers
8. Deductions for social needs from basic and additional wages
9. Expenses for preparation and development of production
10. Expenses for the maintenance and operation of machinery and equipment (RSEO)
11. General production expenses
Total: Workshop cost
12.General expenses
13.Losses from marriage
Total: Production cost
12.Commercial (non-production) expenses
Total: Full cost
Costs for costing items are broader in composition than elemental ones, because take into account the nature and structure of production, creating a sufficient basis for analysis.
2. Incoming and outgoing costs.Incoming costs – These are those funds, resources that have been acquired, are available and are expected to generate income in the future. They are shown as assets on the balance sheet.
If these funds (resources) were spent during the reporting period to generate income and lost their ability to generate income in the future, then they become classified as expired. In accounting, expired costs are reflected in the debit of account 90 “Sales”.
The correct division of costs into incoming and outgoing costs is of particular importance for assessing profits and losses.
3.Direct and indirect costs. TO direct Costs include direct material costs and direct labor costs. They are accounted for in the debit of account 20 “Main production”, and they can be attributed directly to a specific product based on primary documents.
Indirect costs cannot be directly attributed to any product. They are distributed among individual products according to the methodology chosen by the organization (in proportion to the basic salary of production workers, the number of machine hours worked, hours worked, etc.). This technique is described in the accounting policy of the enterprise. Indirect costs are divided into two groups:
General production (production) expenses – These are general shop expenses for organization, maintenance and production management. In accounting, information about them is accumulated on the account. 25 “General production expenses”.
General business (non-production) expenses are incurred for the purpose of production management. They are not directly related to the production activities of the organization and are taken into account in account 26 “General business expenses”. A distinctive feature of general business expenses is that they do not change depending on changes in production (sales) volume. They can be changed by management decisions, and the degree of their coverage can be changed by sales volume.
Dividing costs by direct and indirect depends on the method of attributing costs to the cost of production.
4. Basic and invoices. By technical and economic purpose costs are divided into the following groups:
Basic– costs that are directly related to the production process of products, works, services (materials, wages and wages for workers, wear and tear of tools, etc.). Basic expenses are recorded in the production cost accounts: 20 “Main production”, 23 “Auxiliary production”.
Invoices– costs of managing and servicing the production process (general production and general business expenses). Overhead costs are accounted for in accounts 25 “General production expenses”, 26 “General expenses”.
5. Production and non-production (periodic costs, or period costs).Production costs – These are costs included in the cost of production. These are material costs and can therefore be inventoried. They consist of three elements:
Direct material costs;
Direct labor costs;
General production expenses.
Non-production costs (periodic) – These are costs that cannot be inventoried. The size of these costs depends not on production volumes, but on the duration of the period. These costs include selling and administrative expenses. They are accounted for. 26 “General business expenses” and accounts. 44 “Sales expenses”. Periodic costs are always related to the month, quarter, year during which they were incurred. They do not go through the inventory stage, but immediately have an impact on the calculation of profit. Thus, periodic costs always have an outgoing nature; production costs can be considered incoming.
6. Single-element and complex costs. Single element These are costs that in a given organization cannot be decomposed into components: material costs (minus the cost of returnable waste), labor costs, social contributions, depreciation of fixed assets, and other costs. Complex costs consist of several economic elements. For example, shop (general production) costs, which include almost all elements.
Such a grouping of costs with varying degrees of detail can be carried out depending on economic feasibility and the desire of management. For example, in enterprises with a high degree of automation, wages and deductions account for less than 5% of the cost structure. At such enterprises, as a rule, direct wages are not allocated, but are combined with maintenance and production management costs under the heading “added expenses.”
Since management decisions are usually forward-looking, management needs detailed information about expected costs and income. In this regard, management accounting identifies classification groups of costs that are taken into account when making decisions, planning and forecasting.
1. Fixed and variable costs. You can objectively describe the behavior of costs by studying their dependence on production volumes, those. dividing costs into fixed and variable.
Variable costs increase or decrease in proportion to the volume of production (provision of services, trade turnover), i.e. depend on the business activity of the organization. Both production and non-production costs can be variable. Examples of manufacturing variable costs include direct material costs, direct labor costs, auxiliary materials costs, and purchased intermediate goods costs. Examples of variable non-production costs are the costs of warehousing, transportation, and packaging of finished products, which directly depend on sales volume.
Variable costs characterize the cost of the product itself, all others (fixed costs) characterize the cost of the enterprise itself. The market is not interested in the value of the enterprise, it is interested in the cost of the product. Total variable costs ( IN) have a linear dependence on the indicator of business activity of the enterprise, and variable costs per unit of production (specific variable costs - b) is a constant value (Fig. 2.2).
Rice. 2.2. Dynamics of total (a) and specific (b) variable costs
Production costs that remain virtually unchanged during the reporting period and do not depend on the business activity of the enterprise are called permanent production costs. Even if production (sales) volumes change, they do not change ( A). Fixed costs are expenses for salaries of management personnel, depreciation charges for plant management premises, communication services, travel and other administrative expenses. In practice, the management of an organization makes decisions in advance about what fixed costs should be based on planned estimates for groups of these costs. Fixed costs per unit of production (specific fixed costs - A) decrease stepwise (Fig. 2.3).
Rice. 2.3. Dynamics of total (a) and specific (b) fixed costs
In practice, fixed and variable costs are quite rare. Most costs have both fixed and variable components. That's why they talk about conditionally permanent or conditional variables costs. Conditionally fixed costs – these are costs that grow in leaps and bounds, i.e. at a certain output level, these costs remain constant, and when it changes, they increase sharply. For example, to increase the number of products produced in a workshop, it is necessary to install another machine, but at the same time as production volume increases, fixed costs will increase due to depreciation charges on the machine.
Conditionally variable costs also change depending on changes in the business activity of the organization, but unlike variable costs, this relationship is not direct. For example, a monthly telephone fee includes two components: a fixed part - subscription fee and a variable part - long-distance calls.
To describe the degree of response of variable costs to production volume, use the indicator - cost response coefficient (K), introduced by the German scientist K. Mellerovich. It characterizes the relationship between the rate of change in costs and the rate of growth of business activity of the enterprise and is calculated using the formula:
where Y is the growth rate of costs, %;
X – growth rate of business activity (volume of production, services, trade turnover), %.
Variable costs are a type of proportional costs. They increase at the same pace as the business activity of the enterprise. The cost response coefficient will be equal to 1 (K=1).
Costs that grow faster than the business activity of an enterprise are called progressive. The value of the cost response coefficient must be greater than 1 (K > 1).
Finally, costs whose growth rate lags behind the growth rate of the organization's business activity are called degressive. The value of the response coefficient will lie in the following interval: 0< К < 1.
Therefore, any costs in general can be represented by the formula:
where Y – total costs, rub.; A is their constant part, independent of production volumes, rub.; b – variable costs per unit of production (cost response coefficient), rub.; X is an indicator characterizing the business activity of an organization (volume of production, services provided, turnover, etc.) in natural units of measurement. Graphically the change in costs is presented in Fig. 2.4
Rice. 2.4. Dynamics of total variable and fixed costs
2. Costs taken and not taken into account in estimates. The process of making management decisions involves comparing several alternative options. . The costs compared in this case can be divided into two groups: unchanged for all alternative options and changing depending on the decision made. Costs that are relevant only to a given problem (distinguishing one alternative from another) are called relevant. These are costs whose magnitude will depend on the decision made. Irrelevant are those that do not depend on the decision made. The accountant-analyst, providing management with the initial information for choosing the optimal solution, prepares his reports in such a way that they contain only relevant information.
Example. An order has been received for the manufacture of a product for which the buyer is willing to pay CU 250. There is material in the warehouse for which CU 100 was once paid, but it is not possible to use it then and now except for this order. The cost of processing the material is 200 rubles. At first glance, the order is unprofitable: 250 – (100 + 200) = – 50. However, 100 cu. spent a long time ago, in connection with another decision, and this amount will not change regardless of whether the order is accepted or not. This means that only costs of CU 200 will be relevant in this case. The net income from completing the order will be CU 50.
3. Sunk costs – These are expired costs that cannot be changed by any management decisions. They are usually not taken into account when making management decisions.
4. Imputed (imaginary) costs present only in management accounting. They are added when making decisions when resources are limited, but in reality they may not exist. They characterize the possibilities for using production resources that are either lost or sacrificed in favor of another alternative solution; if resources are not limited, opportunity costs are equal to zero.
5. Incremental and marginal costs. Incremental costs– are additional and arise as a result of the manufacture and sale of an additional batch of products. Marginal costs represent additional costs per unit of production. Thus, both categories of costs arise as a result of the production of additional products, some per unit, and others for the entire output.
6. Planned and unplanned costs.Planned- These are costs calculated for a certain volume of production. In accordance with norms, regulations, limits, estimates, they are included in the planned cost of production.
These include all production costs of the organization. Not planned- these are costs that are not included in the plan and are reflected only in the actual cost of production (losses from defects, downtime, etc.).
The cost classifications discussed above do not solve all the problems of controlling them. Having information on the cost of production, it is impossible to accurately determine how costs are distributed between individual production areas (responsibility centers). This problem can be solved by establishing a connection between costs and income and the actions of those responsible for spending resources. This approach in management accounting is called taking into account costs by responsibility centers, it is implemented in practice by dividing costs into the following groups.
1. Adjustable and unregulated.Regulated costs are subject to the influence of the responsibility center manager, on unregulated he cannot influence. For example, costs associated with violation of technological discipline in a workshop are under the control of the workshop manager, but he cannot influence general business expenses, since this is the prerogative of senior managers; for him, these costs are unregulated.
2.Controlled and uncontrolled. Controllable costs can be controlled by management subjects, while uncontrollable costs do not depend on the activities of management personnel (for example, increasing prices for resources).
3. Effective and ineffective costs.Effective costs– as a result of these costs, they receive income from the sale of those types of products for the production of which these costs were incurred. Ineffective costs– expenses of an unproductive nature, as a result of which no income will be received, because the product will not be produced. In other words, ineffective costs are losses in production (from defects, downtime, shortages, damage to valuables).
