Current costs of the organization: definition, calculation features and types

The costs are classified according to their purpose. In theory and in practical activities, their clear distinction serves as a determining factor for the effectiveness of the work. At all stages of management, costs are grouped, the cost of goods is created. At the same time, appropriate sources of funds are identified. Let's consider further, what are the current expenses of the enterprise.

Classification of costs

The expenses of an economic entity are divided into three categories. In particular, they distinguish:

1. Costs for the production and sale of products. They are the current costs of the organization. They are covered from the profit received from the sale of products, through the circulation of circulating assets.
2. Expenses for renewal and expansion of production. Typically, such costs are one-time and constitute a fairly large amount. Due to their perfection of equipment, technology, the authorized capital increases. They include capital investments in fixed assets, the formation of additional labor resources for the production of new products, the costs of current repairs, etc. These costs are financed from special sources. They include, in particular, depreciation fund, issue of shares, loans, profits and so on.
3. Costs for housing, social, cultural and other needs. These costs are not directly related to production. Their financing is carried out from the funds of special funds. They are formed from the distributed profit.

Directly with the release and sale of products associated capital and current costs. They have different effects on the activities of the economic entity, but they are equally important for achieving the set goals.

Current expenses

The costs of this category constitute the largest share of all the costs of the subject. They include funds aimed at material and raw materials supply, financing of fixed assets, labor remuneration and so on. Current costs are returned at the end of the cycle of production and marketing of products and are included in the revenue.

Goals of Accounting

Current production costs are reflected in accounting documents. The key objectives of cost accounting are:

1. Control costs and profits.
2. Ensuring efficiency and economy.
3. Development of accounting information for the implementation of analysis and management decisions.
4. Ensuring the reliability, timeliness and completeness of information.
5. Correct calculation of taxes.

Principles

Current costs are accounted for based on a number of basic provisions. First of all, the reflection of information must correspond to the goals of improving the activities of the subject. To ensure comparability of different costs, a single nomenclature of articles is being developed. It provides an opportunity to cover various current costs. Production, sales, purchase of materials, raw materials, etc., are thus reflected using common designations that are understandable for all divisions. The nomenclature of articles is also used in the distribution of costs by classification groups.

Analysis

Each economic entity must evaluate the effectiveness of current costs. The evaluation is carried out in terms of rationality and the availability of opportunities for savings in this and forthcoming periods. Current costs will be optimal if they contribute to improving the end result - a continuous increase in turnover and profit. To implement this task it is necessary:

1. Estimate the amount of costs in the amount and percentage of revenue and profit for the past period. Compare the results with those of other entities (especially competitors), as well as the magnitude of costs for the industry and the region as a whole.
2. To study the costs of individual articles. In percent and in the sum to establish their specific gravity in the total current expenditure for the period, estimate the dynamics of this share change.
3. Establish savings reserves in cost items individually, determine how to use them.

Variables and fixed costs

This classification is of great practical importance. Variable current costs are reduced or increased in proportion to the volume of output. They ensure the purchase of materials and raw materials, energy consumption, transportation, trade commission and other costs. Constant current costs from the dynamics of the production volume do not depend. This category includes depreciation charges, interest on the loan, rental fees, utilities, administrative costs, and so on. There is also a separate category of conditionally-constant (variable) costs. Their change is not directly proportional to the volume of output.

Indirect and direct current costs

Unit cost can be calculated using the absorption method. It involves the addition of all production costs. Information on cost is the basis for determining the amount of work in progress, the financial result, the volume of inventory. It allows you to analyze the profitability of individual products, their groups, as well as the productivity of units. In accordance with the results, a decision is made on the expediency of the subsequent release or work. The cost index is also used in the pricing process, especially when determining the regulated cost.

Application Features

Earlier, the absorption method was widely spread in the planned economy. With its help, managerial decisions were made with full capacity utilization and lack of price competition. Now the situation has changed. In particular, the capacity utilization of an enterprise is determined by the demand for products. It, in turn, largely depends on the price. Determine the cost value for a given volume of production can only be after the end of the reporting period. Meanwhile, the manager needs this indicator already at the planning stage of the assortment.

Disadvantages of the method

From what has been said above, it follows that the key drawback of the calculation by full absorption is the lack of a link between the size of costs and the volume of production. In addition, we can distinguish the following disadvantages:

1. The need to apply the basis for the distribution of indirect costs by types of products. The criteria for choosing the latter are very vague. The set of allowed bases is rather limited.
2. In connection with the distribution of indirect costs on products for profit will affect the change in stocks of finished products in warehouses. When accumulating volumes of illiquid goods, the economic entity will receive an increase in its calculated value.

These shortcomings can be completely avoided if we apply the method of dividing costs into fixed and variable costs. In this case, the cost of stocks will only include the last. At the same time, fixed costs are included in the expenses of the period. As a result, profits are derived from the dependence on changes in the volume of stocks.

Cost structure

The costs that form the cost price are divided according to the economic content into:

1. Material.
2. Payment of labor.
3. Depreciation of OF.
4. Deductions to soc. needs.
5. Other costs.

The structure of these groups depends on various factors. In particular, it affects the nature of manufactured products and materials and raw materials used, the technical level, the forms of organization, the location of production, the conditions of supply and sale of goods.

Material costs

In all economic sectors, these costs constitute the bulk of the cost price. The material stocks include semi-finished products, raw materials, energy, fuel and so on. Some of these objects are processed or assembled. This, in particular, refers to the semi-finished products and materials purchased from third parties. The allocation of energy and fuel in the resources is conditioned by their national economic importance. To material costs also include the cost of packaging, packaging, parts, tools. The estimation of resources is carried out proceeding from the purchase price (without VAT), surcharges, commissions to foreign trade, supply and intermediary subjects, customs duties and some other indicators. From the material costs, the cost of residual heat carriers, semi-finished products, raw materials that are formed during the production of products and partially or completely lose their consumer properties and, consequently, can not be used further, is excluded.

Salary

The cost of it reflects the participation of living labor in the formation of production costs. These costs include the salary of the main staff, as well as employees who are not staffed, but are involved in the production of products. Remuneration consists of:

1. З / п, which is charged at the tariff rates, piece rates, official salaries according to the calculation system adopted by the company.
2. The cost of products issued as a payment in kind.
3. Supplements and surcharges.
4. Prizes for high production performance.
5. Payment of additional and regular vacation days.
6. The cost of services provided free of charge.
7. One-time bonuses for long service.
8. Allowances for work in the Far North.
9. Other costs.

Other elements

Deductions to soc. Needs are a form of redistribution of national income to finance social needs. The funds are directed to the relevant extra-budgetary funds and have a designated purpose. Depreciation is included in the cost of production in amounts that are calculated in accordance with the carrying amount of property, plant and equipment and current standards. Depreciation is charged to both own facilities and leased (unless otherwise specified in the agreement). As part of other costs there are a variety of costs. They include, in particular, fees and taxes, deductions to funds, insurance premiums, payments for pollution of nature, payment of interest for using the loan, representation and travel expenses, payment for work related to certification, remuneration for rationalization, invention and so on .