Principles of economic analysis of cost behavior in management accounting

In order to manage an organization, it is necessary to have information about its activities, including information on costs in changing conditions, as it helps to assess the competitiveness of output products, form reserves of increasing profits.

In doing so, it is necessary to strictly observe the basic principles of economic analysis, which consist in the following:

• The principles of economic analysis must necessarily be based on a scientific basis, be dialectical in nature and, at the same time, adequately take into account existing laws of economic development and modern methods of research and evaluation;
• All kinds and principles of economic analysis must be formed on the basis of state interests, that is, from the point of view of their conformity to the state policy in the economic and social spheres;
• The principles of economic analysis must comply with international standards in this particular field of activity;
• Analytical activity should ensure the systematic nature of the consideration of each object, the study of its elements in their interdependent relationship with each other;
• Analysis must be carried out based on its most important goal of obtaining the most objective and accurate information about the object under study;
• Analytical activities should be dynamic, constantly evolving on the basis of modern requirements;
• The analysis should ensure the availability of external audit in order to verify the quality and reliability of the results;
• Analytical activities should be integrated in order to provide a comprehensive view of all aspects of the economic activity of the enterprise;
• The analysis should be made active and efficient in order to be able to timely and constantly inform the responsible persons about the state of affairs in the enterprise;
• The principles of economic analysis should be based on a democratic basis, but the analysis should be carried out promptly and systematically, on the basis of an understandable and easy to understand algorithm;
• The analytical activity itself should be efficient and low-cost;
• The analysis should provide an opportunity to formulate an objective forecast of the options for the development of the enterprise, in the context of possible changes in the business environment.

For example, for more convenient forecasting of changes in costs, they are conditionally divided into variables and constants. It is important to take into account that variable costs, when analyzing the behavior of costs, change at different degrees of business activity, and fixed costs remain unchanged. However, it should be noted that this condition is relative. For planning, you can define 2 types: mandatory, which can not be reduced without significant changes in the activities of the enterprise, and discretionary, which, if necessary, can change, because Depend on management decisions and can be reduced. There are also mixed costs, including the features of both variables and fixed costs. The most effective method is the one that reflects the change in the specific type of expenditure when the activity dynamics change. As a rule, in practice methods are used: graphical, boundary conditions and correlation-regression analysis.

With the graphical method, it is possible to determine the dependence of the change in these or other costs when the volume of production changes. The graph will clearly show the entire dynamics of the cost behavior. This is a quick but approximate method. It should not be used if, according to this method, significant financial decisions are made.

The method of boundary conditions is also based on plotting the graph. The essence of it is to calculate the slope of the line, which will display the value of variable costs. It has a significant drawback - it only applies 2 data pairs with the largest and lowest values. Therefore, those methods that use all available data are more accurate.

Thus, the principles of economic analysis suggest that in this particular case, the choice of the most accurate and correct method of analysis will make it possible to make effective management decisions related to the regulation of the cost of production. This will improve the profitability of products and the competitiveness of the enterprise.