Conditionally constant costs are ... Enterprise cost structure. Costs and their classification

In the concept of management accounting, costs are important, since in the course of current activities, their analysis is mandatory. Conditionally fixed costs are general economic expenses, advertising costs, as well as those that do not depend on the volume of production. This part of the cost is for each organization, so its study and optimization make it possible to increase profits.

Why do you need to classify costs by class?

To analyze the costs of the company was simpler and more efficient, they are classified according to certain characteristics. This division allows us to identify their correlation and to calculate how each separate item of costs affects the cost of production and the profitability of the business as a whole.

In order for the enterprise cost structure to be orderly, it is necessary to effectively maintain accounts and assign costs to objects. For this purpose, expenses are classified according to similar characteristics. The choice of differentiation determines the object: if it changes, it can entail a change in the cost category.

Types of classifications:

• Subjective. Costs are grouped according to specific characteristics: direct or indirect, permanent or variable.
• Objective. In this case, subjective classification is attached to a specific object.

At each enterprise, costs can be differentiated in different ways, so that the cost structure is clear and understandable. Management accounting allows you to choose the most optimal method. It should be noted that all costs are grouped by type of expenditure, cost bearers and the place where they arise.

By type, costs can be divided according to economically similar factors and by costing items.

Cost carriers are products, types of work or services. This category of expenditure is necessary in order to determine the unit cost of production.

The costs and their classification depend on the place of origin: these may be production workshops or other units. It is advisable to group expenses in the accounting so that the information is as accessible as possible for the analysis of costs and the definition of an economy strategy.

Costs and their classification

The enterprises distinguish the main types of costs:

• Conditionally fixed costs;
• Conditionally variable costs.

Conditionally constant costs are those that do not depend on the time period and production volumes. These costs increase with the increase in the scale of economic activity, but at a slower rate. In some cases, their growth tends to jumps.

Simply put, conditional-constant costs are those that arise with a sharply increased volume of production, for example, the cost of additional equipment.

Conditional variable costs include costs that are associated with the purchase and sale of products. Their value depends on many factors: the prices of suppliers, the rate of inflation and others.

Gross costs are calculated as the sum of conditional variables and conditionally fixed costs.

To calculate conditional constant costs in a cooperative building, the formula should be the following: it is necessary to add down expenses for all enterprises and institutions that belong to the cooperative building.

Internal and external costs

In relation to the environment, costs are classified into internal and external costs. Internal costs of the enterprise are financed by own forces, and external companies are entrusted with the care of external organizations or society as a whole.

The grouping of costs in directions and articles is used to calculate the costs of manufacturing and selling goods or services. To make it more convenient to calculate losses and profits, to analyze the cost price and establish prices, a calculation sheet is compiled. For articles, costs are divided according to the role they play in the enterprise and what needs are used.

Indirect and direct costs

Indirect or direct costs are divided according to the method of assigning costs to cost.

Indirect are those costs that are not accrued per unit of output, but are accumulated in the accounts. After that they are included in the cost price by calculation. As a rule, indirect costs are taken into account at the places of their origin, and then distributed among the types of products. These include the salary of temporary workers or the cost of purchasing additional materials.

Direct costs are based on the primary documents for each unit of output. All costs related to a particular product are called direct: the purchase of raw materials and material, the wages of the main workers, and any other material costs. Carrying out the calculation of the object, it is necessary to understand that the greater the proportion of direct costs, the more accurately you can calculate the unit cost of goods.

Costs of a technical and economic nature

According to the technical and economic designation, the costs can be divided as follows:

• Basic.
• Overhead.

The main costs are usually those that are directly related to the production process or the provision of services. These are the expenses necessary to carry out production and release a specific product: the cost of purchasing materials, the costs of electricity, fuel, labor and so on.

General production and business expenses are considered indirect. They are connected with the maintenance of the structural divisions of the enterprise.

Expenses characterizing the activities of the enterprise

In order to analyze the activity of the enterprise as a whole and evaluate the finished products, the structure of the company's costs has the following form: expenses are divided into incoming and outgoing. Inbound refers to the acquired funds that are used to make a profit. If, over time, they have lost relevance or are consumed, they are transferred to expired costs.

In the asset balance, incoming costs can be reflected as goods, finished goods, stocks or work in progress.

The costs that relate to social or management development programs are usually called discretionary. To obtain average unit costs, it is necessary to add specific constant and variable costs.

Types of variable costs

Depending on changes in production volumes, non-permanent costs can be divided into types:

• Proportional. These costs change at the same rate as the scale of production.
• Progressive. Such costs increase much faster than the growth rate of the enterprise's activity. This can be due to interruptions in work or downtime.
• Degressive. To increase profits and reduce costs, the pace of these costs should exceed the pace of progressive and proportional costs.

Conditional variables and conditionally fixed costs are important indicators in any business, therefore it is necessary to clearly understand the mechanism of their formation.