Methods for calculating the cost of production. Constant costs per unit of output

The cost of production is an important economic indicator that reflects the efficiency of production activities. Therefore, it is so important to be able to correctly calculate and draw informed conclusions. Let's consider in detail the main types, methods of calculation.

The Essence

Calculation is the process of grouping all costs associated with the production of products by economic elements. This is the method of calculating costs in monetary terms. The main methods of calculating: boiler, coiled and ordering. All other methods of calculating the cost are a combination of the methods listed above. The choice of one or another method of calculation depends on the industry specifics of the organization's activities.

An equally important issue is also the choice of the object of calculation. It depends on the entire system of managerial and analytical accounting, for example, on the division of costs into direct and indirect costs. Objects of calculations are expressed in:

• Natural units of measurement (pcs, kg, m, etc.);
• Conditionally-natural parameters, which are calculated by the quantity of the type of product whose properties are reduced to the main parameters;
• Conditional units are used to measure goods consisting of several types; One of the species is taken as a unit by some attribute, and the rest is set to the calculation factor;
• Value units;
• Time units (for example, car-hour);
• Units of work (for example, ton-kilometer).

Calculation tasks

They are as follows:

• Competent justification of the objects of settlements;
• Accurate and reasonable accounting of all expenses;
• Accounting for the volume and quality of manufactured products;
• Control over the use of resources, compliance with approved amounts of costs for maintenance and administration;
• Determination of the results of work of the divisions on cost reduction;
• Revealing of production reserves.

Principles

Methods of calculating production costs are the totality of the reflection of costs for manufacturing products, by which you can determine the actual cost of a particular type of work, or its units. The choice of one or another method of calculation depends on the nature of the manufacturing process. The use of calculating methods intended for mono-production organizations in enterprises that produce non-homogeneous goods distorts data on the profitability of products and "smears" costs. When calculating the costs of industrial production from the amount of costs excludes costs for WIP at the end of the year.

Methods for calculating costs allow:

• To study the process of formation of the cost price of specific types of goods;
• Compare actual costs with planned ones;
• Compare production costs for a specific type of goods with the costs of competitors' products;
• Justify the prices of products;
• Make decisions on the production of cost-effective products.

Expenditure

The total cost of manufacturing products includes the costs of:

• Purchase of raw materials;
• Purchase of fuel, including for technological purposes;
• Salary of workers and accrual for social needs;
• General production, economic expenses;
• Other production costs;
• Commercial expenses.

The first five items of expenditure are the production cost. Commercial costs reflect the amount of costs for the sale of goods. This is the cost of packaging, advertising, storage, transportation. The sum of all these items of expenditure is the total cost.

Types of expenses

Classification of methods for cost accounting provides for the division of costs into groups. Direct costs are associated with the process of producing the product itself. These are the first three items of expenditure. Indirect costs are allocated to the cost of products through certain coefficients or percentages.

These two groups of costs can vary greatly depending on the specifics of the activity. In mono production direct costs include absolutely all costs, since the result is the production of one product. But in the chemical industry, where a gamut of other substances is obtained from one raw material, all costs are indirect.

Variables and fixed costs per unit of output also stand out. The second group includes expenses, the amount of which practically does not change with the fluctuation in the volumes of output of products. Most often these are general production and economic expenses. All costs, the volume of which increases with the growth of production, relate to variables. This includes the amount of funds sent for the purchase of raw materials, fuel, salary with charges. The specific list of cost items depends on the specifics of the activity.

The boiler (simple) method

This is not the most popular method of calculation, because it allows you to display information about the amount of costs for the entire production process. This method of calculation uses single-product enterprises, for example, the coal mining industry. In such an organization there is no need for analytical accounting. The prime cost is calculated by dividing the total cost of production (in the example considered - the number of tons of coal).

Custom method

In this method, the object of calculation is a specific production order. The cost of production is determined by dividing the amount of accumulated costs by the number of manufactured items. The principal feature of this method is the calculation of costs and final results for each order. Overhead is accounted for in proportion to the distribution base.

The custom costing method is used for single or small-scale production, in which the manufacturing process lasts longer than the reporting period. For example, in machine-building plants on which rolling mills are built, power excavators, or in the military-industrial complex, where the processing processes predominate and rare products are produced. It is acceptable to apply this calculation scheme for the manufacture of complex products or products with a long production cycle.

Cost accounting is carried out in the context of the final products (completed orders) or intermediate products (parts, nodes). It depends on the complexity of the order. The first option is used if the object is products with a short production cycle. Then all expenses are included in the cost price. If it is a question of manufacturing intermediate products, the cost price is determined by dividing the amount of costs by order by the number of identical products.

Process-based costing method

This method is used in mining (coal, gas, mining, oil, logging, etc.) industries, in energy, in processing industries. All of the above organizations are characterized by a mass production type, not a long production cycle, a limited range of products, one unit of measure, the absence or insignificant volume of WIP. As a result, the products manufactured are simultaneously both accounting and calculating objects. Accounting of costs is carried out throughout the production cycle and at a specific stage. Upon completion of the process, all expenses are divided by the number of units of production. So the cost is calculated.

Alternate way

Based on the name of this method, it is clear that the object of calculation is a process, the result of which is the production of intermediate or final products. This method of calculation is used in mass production, where products are manufactured by processing raw materials in several consecutive stages. Some elements of products can pass only a certain number of limits and be released as intermediates. An indispensable condition is a stage-by-stage production process, divided into repetitive operations.

A feature of this method is the formation of costs for each completed repartition or for a specific time period. The prime cost is calculated by dividing the amount of expenses accumulated for a repartition or a period of time for the manufactured quantity of products. The amount of expenses for the production of each part is the cost of finished products. Direct costs are calculated by redistribution. To distinguish between the costs between semi-finished products and GP for each order, the WIP balances at the end of the month are estimated.

The forward calculation method is very material-intensive. Therefore, accounting should be organized so that to control the use of raw materials in production. Most often for these purposes, the output of semi-finished products, rejects and wastes is calculated.

Normative method

This method provides for the preliminary calculation of the cost price for each product based on existing estimates. The latter are recalculated in each period. Separately, costs are allocated for norms and deviations with the identification of the causes of the latter. The prime cost is calculated as the sum of standard expenses, changes in these norms and deviations. The standard method of calculating allows you to calculate the cost price before the end of the month. All costs are allocated to the responsibility centers and are compared with the actual costs.

The ABC method

Algorithm of calculations:

• The whole process of the organization is divided into operations, for example, order registration, equipment operation, changeover, quality control of semi-finished products, transportation, etc. The more complex the organization of work, the more functions should be allocated. Overhead costs are identified with activities.
• Each work is attributed to a separate cost item and a unit of its measurement. At the same time, two rules should be observed: ease of obtaining data, the degree to which the posted figures of expenditures correspond to their actual purpose. For example, the number of concluded orders for the supply of raw materials can be measured by the number of signed contracts.
• The cost of a unit of expenditure is estimated by dividing the amount of transaction costs by the number of the corresponding operation.
• The cost of work is calculated. The sum of costs per unit of production is multiplied by their number by types.

That is, the accounting object is a separate operation, calculating - the type of work.

Selection

Methods of calculating the cost are part of the process of organizing production, accounting and workflow at the enterprise. The choice of one or another method of calculation depends on the characteristics of the enterprise: industry, type of products, labor productivity, etc. In practice, all these methods of calculation can be applied simultaneously. It is possible to calculate the cost price of orders by using a demonstrative method or using the standard method of using raw materials. The chosen method should be prescribed in the order on accounting policy.

Example

The enterprise produces three types of products. It is necessary to develop a planned cost price, if it is known that the monthly production volume is: for the product A = 300 pieces, the product B = 580 pieces, the product C = 420 pcs.

Whichever method of calculation is chosen, you need to determine the amount of cost per unit of the product (Table 1).

No.	Index	Amount of expenditure
		A	AT	FROM
1	Material D (price 0.5 rubles / kg), kg / units,	1	2	1
2	Material E (price 0.9 rubles / kg), kg / unit.	2	3	3
3	Time of work, h / unit.	3	4	1
4	Rate of payment, rubles / h	4	3	2.5

Table 2 shows the indirect costs.

No.	Article costs (rubles per month)	Place of origin
		Production	Implementation	Administration	Total
1	Labor remuneration and social contributions	400	610	486	1526
2	Electricity costs	260	160	130	520
3	OS Repair	40	10	40	100
4	Stationery	90	170	180	430
5	OS wear	300	100	150	550
6th	Advertising	-	80	-	80
7th	Transportation	180	400	200	780
8	TOTAL	1270	1530	1186	3986

We calculate the amount of expenses using different methods of calculating the cost price.

Option 1

Define the amount of direct costs for each product, based on the data in Table 1:

Product A: (1 * 0.5 + 2 * 0.9) * 300 = 690 rubles / month.

Item B: (2 * 0.5 + 4 * 0.9) * 580 = 690 rubles / month.

Item C: (3 * 0.5 + 3 * 0.9) * 420 = 690 rubles / month.

The total amount of direct costs is 4702 rubles per month.

Calculate the amount of expenditure on labor for each type of product per month. To do this, multiply labor intensity, tariff rate and production volume:

Product A: 3 * 4 * 300 = 3600 rubles / month.

Item B: 2 * 3 * 580 = 3480 rubles / month.

Item C: 1 * 2.5 * 420 = 1050 rubles / month.

The total cost is 8130 rubles.

The next stage is direct costing, that is, the calculation of the amount of direct costs.

Cost Item	Article A	Article B	Article C
Direct material costs	2.3	4.6	3.2
Salary and social benefits	14.89	7.45	3.1
The main direct costs	17.19	12.05	6.3
Volume of production	300	580	420
The amount of expenses for the entire volume of production	5157	6989	2646
TOTAL	14792

Define the amount of indirect costs per unit of product:

• Production: 1270/1300 = 0.98 rubles per unit.
• Realization: 1530/1300 = 1,18 rubles per unit.
• Administrative: 1186/1300 = 0.91 rubles per unit.

Based on the calculations presented earlier, we determine the cost price of manufacturing products:

Cost Item	Article A	Article B	Article C
Direct costs per unit	2.3	4.6	3.2
Labor costs	14.89	7.45	3.1
Direct Hosting	17.19	12.05	6.3
Indirect costs	0.98
Production cost	18.17	13.03	7.28
Expenses for implementation	1.18
Administrative expenses	0.91
Total cost	20.26	15.12	9.37

This calculation example is based on costing by dividing costs into direct and indirect costs.

Option 2

Consider an example of a calculation in which indirect costs are allocated depending on the laboriousness of the production process.

The calculation of direct costs has already been carried out in the framework of the previous example. We calculate the total laboriousness of the process:

Item A: 3 * 300 = 900 hours.

Item B: 2 * 580 = 1160 hours.

Item C: 1 * 420 = 420 hours.

Define rates of distribution of indirect costs, by dividing the sum of costs by the volume of production:

• Production: 1270/2480 = 0.51
• Realizations: 1530/2480 = 0,62
• Administrative: 1186/2480 = 0.48

Define the indirect costs by multiplying the laboriousness of a unit of the product by the previously calculated rate of accrual.

Index	Indirect costs, rubles.
	Article A	Article B	Article C
Labor intensity	3	2	1
Production costs (rate - 0.51)	3 * 0.51 = 1.53	2 * 0.51 = 1.02	0.51
Realization costs (rate - 0.62)	3 * 0.62 = 1.86	2 * 0.62 = 1.24	0.62
Administrative costs (rate - 0.48)	3 * 0.48 = 1.44	2 * 0.48 = 0.96	0.48

Based on the calculations presented earlier, we determine the cost of production:

Cost Item	Article A	Article B	Article C
Direct costs per unit	2.3	4.6	3.2
Labor costs	14.89	7.45	3.1
Direct Hosting	17.19	12.05	6.3
Indirect costs	1.53	1.02	0.51
Production cost	18.72	13.07	6.81
Expenses for implementation	1.18
Administrative expenses	0.91
Total cost	22.02	15.27	7.92

Profitability

The profit of production is the income that remains from the proceeds after deducting all expenses. If the prices for the goods are set regulated, then this indicator depends on the manufacturer's strategy.

In modern conditions, the objects of direct regulation at the legislative level are gas prices for monopolists, electricity, freight rail transport, life-saving medicines. On the part of local authorities, the object of direct regulation is a wider range of goods. It is determined depending on the social tension in the region and the possibilities of the budgets.

If prices are set free, then the profit is calculated according to the rate of return.

Example

The structure of the cost per thousand units includes:

1. Raw materials - 3 thousand rubles.
2. Fuel, including for production purposes - 1,5 thousand rubles.
3. Salary of workers - 2 thousand rubles.
4. Charges for salaries - 40%.
5. Production costs - 10% of the salary.
6. Household expenses - 20% of the salary.
7. Transportation and packaging - 5% of the cost.

You need to calculate the cost, using the standard method of calculating costs and determine the price per unit of the product.

At the first stage, we calculate the amount of indirect costs per 1000 items:

• Payroll accruals: 2000 * 0.04 = 800 rubles;
• Production costs: 2000 * 0.01 = 200 rubles;
• Economic expenses: 2000 * 0,02 = 400 rubles.

The cost price is calculated as the sum of expenses for all items of expenditure, excluding transportation costs: 3 + 1.5 + 2 + 0.8 + 0.2 + 0.4 = 7.9 (thousand rubles).

Expenses for packaging: 7.9 * 0.05 / 100 = 0.395 thousand rubles.

The total cost price: 7.9 + 0.395 = 8.295 thousand rubles; Including per item: 8,3 rubles.

Suppose that the profit per unit of product is laid at the level of 15%. Then the price is: 8,3 * 1,15 = 9,55 rubles.

Marginal method

Marginal profit is no less important indicator of production efficiency. He counts on the enterprises with the purpose of optimization of manufacture - selection of assortment with greater profitability. When the equipment is fully loaded, the calculation must be carried out taking into account the maximization of profit.

The essence of the method consists in dividing the costs of production and sales costs, constant and variable. Direct costs are called, which vary in proportion to the growth in the volume of services. Therefore, the cost price is calculated only within variable costs. The main advantage of this method is that the limited cost price simplifies the accounting and control of expenses.

Marginal revenue is the excess of income from sales over indirect costs:

MD = Price - Variable costs.

Example

We calculate the marginal profit for the manufacture of a product A, the price for which is 160 thousand rubles, variable costs - 120 thousand rubles. For simplicity of calculations, we accept the condition that when the demand changes, the sum of fixed costs is 1 million rubles.

No.	Index	The volume of sales at a given level of production, thousand rubles.
		50 tons	40 tons	55 tons
1	Price	7500	6000	8250
2	Variable costs	5500	4400	6050
3	Marginal profit	2000	1600	2200
4	Fixed costs	1000	1000	1000
5	PE	1000	600	1200

The change in marginal profit is calculated as follows:

The increase in the volume of output by 5 tons: (55-50) * (160-120) = 200 thousand rubles;

Decrease in the volume of output by 10 tons: (40-50) * (160-120) = -400 thousand rubles.

For enterprises that use semi-finished products in production, it is necessary to take into account that the cost of materials and work on manufacturing in the cost of the final product is determined by all costs. All contingent costs are recognized in the reporting period and remain outside of margin costs.

It is also necessary to take into account the limitations in the application of this method. This will avoid errors in planning. The decision to increase the production of profitable and reduce the production of non-profitable products should be based not only on the calculation of marginal revenue. Plans to develop the range of products in the future, increase production capacity to meet demand, improve the cost management system - all these factors of business valuation are no less important.