Conditionally variable costs do not include. Does it make sense to divide costs into fixed and variable? Types of variable costs

In the activities of any enterprise, the adoption of the correct management decisions is based on an analysis of its performance indicators. One of the objectives of such analysis is to reduce production costs, and, consequently, increase business profitability.

Fixed and variable costs and their accounting are an integral part of not only calculating product costs, but also analyzing the success of the enterprise as a whole.

Correct analysis of these items allows you to make effective management decisions that have a significant impact on profits. For analysis purposes in computer programs at enterprises it is convenient to provide for automatic allocation of costs into fixed and variable based on primary documents, in accordance with the principle adopted in the organization. This information is very important for determining the “break-even point” of a business, as well as assessing profitability various types products.

Variable costs

To variable costs include costs that are constant per unit of production, but their total amount proportional to the volume of production. These include the costs of raw materials, Consumables, energy resources involved in the main production, salary of the main production personnel(together with charges) and cost transport services. These costs are directly included in the cost of production. In monetary terms, variable costs change when the price of goods or services changes. Specific variable costs, for example, for raw materials in physical terms, can be reduced with an increase in production volumes due, for example, to a reduction in losses or costs for energy resources and transport.

Variable costs can be direct or indirect. If, for example, an enterprise produces bread, then the costs of flour are direct variable costs, which increase in direct proportion to the volume of bread production. Direct variable costs may decrease with the improvement of the technological process and the introduction of new technologies. However, if a plant processes oil and as a result receives one technological process, for example, gasoline, ethylene and fuel oil, then the cost of oil for the production of ethylene will be variable, but indirect. Indirect variable costs in this case, they are usually taken into account in proportion to the physical volumes of production. So, for example, if when processing 100 tons of oil, 50 tons of gasoline, 20 tons of fuel oil and 20 tons of ethylene are obtained (10 tons are losses or waste), then the cost of producing one ton of ethylene is 1.111 tons of oil (20 tons of ethylene + 2.22 tons of waste /20 t ethylene). This is due to the fact that, when calculated proportionally, 20 tons of ethylene produce 2.22 tons of waste. But sometimes all waste is attributed to one product. Data from technological regulations are used for calculations, and actual results for the previous period are used for analysis.

The division into direct and indirect variable costs is arbitrary and depends on the nature of the business.

Thus, the cost of gasoline for transporting raw materials during oil refining is indirect, and for transport company direct, since they are directly proportional to the volume of transportation. Wages of production personnel with accruals are classified as variable costs for piecework wages. However, with time-based wages, these costs are conditionally variable. When calculating the cost of production, planned costs per unit of production are used, and when analyzing actual costs, which may differ from planned costs, both upward and downward. Depreciation of fixed assets of production per unit of production volume is also a variable cost. But this relative value is used only when calculating the cost of various types of products, since depreciation charges, in themselves, are fixed costs/expenses.

This division is based on the economic meaning of the costs that an entrepreneur incurs in the process of his activities. Some costs - fixed costs do not depend on the volume of production and sales, others - variable costs directly depend on the volume of production and sales of products, goods, services. However, in real life fixed and variable costs are not immutable, they constantly change in the process entrepreneurial activity. Therefore, in economics they are usually considered as conditionally fixed and conditionally variable costs. In this material we try to give examples and explain why they are considered.

Conditionally fixed and conditionally variable costs: definition.

Conditionally fixed costs – these are costs that are not related to the volume of production and sales of products, goods, services, and in the process of entrepreneurial activity change both in quantity and quality. Fixed costs can turn into variable costs. We wrote about this in.

Conditionally variable costs - these are costs that are directly related to the volume of production and sales of products, changing during the life of the entrepreneur’s activity both in quantity and in their quality and composition.

Conditionally fixed and conditionally variable costs: examples of conditionally fixed costs.

In the article, we gave detailed examples of such expenses; now we will show examples of changes in constant and variable costs and explain why they are essentially conditionally fixed and conditionally variable costs.

1. Fixed costs in the form of rent when renting an office may change during the course of the entrepreneur’s activities. They can increase or decrease quantitatively - the rental price rises or falls, or the rented area changes. They can also change structurally: the entrepreneur bought out a rented office or bought his premises in another location. Quantitatively, they may decrease, because now the entrepreneur is charged depreciation, and it is lower than rental payments. They may also change structurally: to purchase his premises, the entrepreneur took out a loan, and now the total amount of fixed costs for maintaining the premises may remain the same, and the structure is partly depreciation, and partly interest on the loan.
2. The accounting department's salaries are a fixed cost. Over time, the volume of wage costs may increase (expansion of staff due to an increase in operations, types of activities), or may decrease - transfer of responsibility accounting specialized organization on .
3. Tax payments. There are taxes that also relate to fixed costs: property tax, unified social tax with wages administrative personnel, UTII. The amounts of these taxes may also change during the course of business. The amount of property tax may increase due to an increase in the value of property (purchase of new property, revaluation of value), due to an increase in tax rates. It may also decrease (sale of property, revaluation of value). The amounts of other taxes related to fixed costs may also change. The transition to outsourcing accounting services does not imply the calculation of wages, therefore the unified social tax will also not be accrued.
4. Fixed costs can be changed by converting them into variables. For example, when an enterprise produces products and produces some of the components in-house. When the volume of orders decreases, it is more profitable to find a third-party manufacturer and receive components from it, thereby eliminating part of the fixed costs in the form of depreciation of equipment, its maintenance, depreciation of premises, selling it or leasing it. In this case, the cost of supplied components will be considered completely variable costs.

Conditionally fixed and conditionally variable costs: examples of conditionally variable costs.

1. Variable costs in the form of material costs in the production of products (raw materials, materials, components) are considered conditionally variable costs. They also change during the course of activity. Changes may occur:
   – due to price changes (increase in supplier prices due to inflation, decrease in prices due to changes in suppliers with more favorable conditions),
   – due to changes in technology (use of less expensive types of raw materials, use of cheap substitutes),
   – due to changes in production itself (previously purchased components on the outside, the enterprise can begin to produce on its own. In this case, part of the variable costs will turn into constants in the form of depreciation of equipment, salaries of foremen and salaries of workers, part of the costs will remain variable in the form of costs of raw materials and materials.
2. Variable costs in the form of piecework wages. Such costs change in quantity, as well as in connection with changes in payment terms: increasing or decreasing standards, applying new payments that stimulate labor productivity. Increase or reduction of personnel, etc. That is, the size of variable costs changes throughout the life of the enterprise.
3. Variable costs in the form of interest payments to sales managers. Such costs are also constantly in a state of change, since the amount of remuneration changes depending on sales volumes. Changes may also concern the terms of payment of remuneration (interest). When a certain sales volume is reached, percentages may increase or decrease, as a result, variable costs will change both quantitatively and qualitatively.

Examples given conditionally fixed and conditionally variable costs clearly show why expenses are considered conditional. In the process of entrepreneurial activity, the entrepreneur tries to influence profits: reduce costs and increase income, at the same time the market and external environment also influences the entrepreneur. As a result of such activities, expenses constantly change under the influence of various factors, which is why they are generally considered conditionally fixed and conditionally variable costs.

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.

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 have a linear dependence on the indicator of business activity of the enterprise, and variable costs per unit of production are a constant value.

Production costs that remain virtually unchanged during the reporting period do not depend on the business activity of the enterprise and are called fixed production costs. Even if production (sales) volumes change, they do not change. Examples of permanent production costs are expenses for renting production space, depreciation of fixed assets for production purposes.

Fixed costs are the costs of renting premises, security, depreciation, etc. Fixed costs per unit of production are reduced in steps. Total fixed costs are constant and do not depend on the volume of business activity, but may change under the influence of other factors. For example, if prices rise, total fixed costs also rise.

In real life, it is extremely rare to encounter costs that are purely fixed or variable in nature. Economic phenomena and associated costs are much more complex from a maintenance point of view, and therefore in most cases the costs are conditionally variable (or conditionally constant). In this case, a change in the organization's business activity is also accompanied by a change in costs, but unlike variable costs, the relationship is not direct. Conditionally variable (conditionally fixed) costs contain both variable and fixed components. An example is the payment for using a telephone, consisting of a fixed subscription fee (fixed part) and payment for long-distance calls (variable component).

Therefore, any costs in general view can be represented by the formula

where Y is 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 - indicator characterizing business activity organization (volume of production, services provided, turnover, etc.) in natural units of measurement.

Costs taken into account and not taken into account in estimates. The process of making a management decision involves comparing several alternative options with the aim of choosing the best one. The indicators compared can be divided into two groups: the first remain unchanged for all alternative options, the second vary depending on the decision made. When considered a large number of alternatives that differ from each other in many respects, the decision-making process becomes more complicated. Therefore, it is advisable to compare not all indicators with each other, but only the indicators of the second group, i.e. those that change from variant to variant. These costs, which distinguish one alternative from another, are often called relevant in management accounting. They are taken into account when making decisions. Indicators of the first group, on the contrary, are not taken into account in the assessments.

Sunk costs. These are expired costs that no alternative option can correct. In other words, these previously incurred costs cannot be changed by any management decisions. Sunk costs are not taken into account when making decisions. However, the costs not taken into account in assessments are not always irrecoverable.

It is almost impossible to make a clear division of costs into variable and constant in accounting, since some of them are conditionally constant (semi-constant) and conditionally variable (semi-variable). Conditional variables (conditionally constant) costs contain both variable and fixed components. As an example, you can pay for using a telephone, consisting of a fixed subscription fee (fixed part) and payment for long-distance calls (variable term).

Any costs in general can be represented by the formula:

Y= a + bX, (1.4.)

where Y is 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.

If in this formula the constant part of costs is absent, i.e. a = O, then these are variable costs. If the cost response coefficient (b) takes null value, then the analyzed costs are constant.

For management purposes - assessing the efficiency of the enterprise, analyzing its break-even, flexible financial planning, making short-term management decisions and solving other issues - it is necessary to describe the behavior of costs using the above formula, i.e. divide them into constant and variable parts.

The general characteristics of costs relative to the volume of production and sales of products are presented in Table 2.

Table 2. Classification of costs in relation to production volume

Enterprise expenses are divided into fixed and variable. Fixed costs are not affected by the scale of production and sales, but variable costs are. However, in practice there are no fixed and unchanging costs. All these expenses are constantly changing. Therefore, a distinction is made between semi-fixed and semi-variable expenses.

Definition

Conditionally fixed costs are expenses that do not depend on the scale of production and sales, or sales of services. But you need to take into account that fixed costs can turn into variable ones. Fixed costs are contrasted with variable ones. Collectively, total expenses are formed.

Simply put, these are expenses that do not change throughout the budget period. In this case, the sales volume does not matter. But you need to take into account that these are conditionally fixed costs. That is, they are not permanent in the full sense of the word. The size of these expenses changes under the influence of changes in the scale of the enterprise's activities. For example, there are these factors that influence semi-fixed costs:

• Introduction to sale of new products.
• The emergence of new branches.

The scale of the enterprise's activities changes extremely slowly. That is why costs are called conditionally constant, and not just constant.

Examples of conditionally constant expenses

The enterprise usually bears these semi-fixed expenses:

• Rent payment. Most companies and enterprises rent commercial premises. This could be renting an office, commercial premises, workshop, warehouse, lecture hall. A fixed rent is established. It does not depend on the scale of sales or income of the enterprise. Even if the company has not earned anything at all, it still must pay for the rented premises. That is, this consumption is stable and does not depend on production. Therefore, this is a conditionally constant waste.
• Administration salary. The administrative staff includes an accountant and a manager. As a rule, management personnel receive a fixed salary depending on the time worked. Its size usually does not depend on the scale of production or quantity sold. Consequently, wages form a semi-fixed expense. The salary may consist of a fixed and variable part. Conditionally variable costs include, for example, interest and the piecework element of wages.
• Depreciation. Depreciation is charged on machinery, various equipment, vehicles. This is a constant cost, as any equipment is subject to wear and tear and obsolescence. It does not matter how many products are produced.
• Payment for services necessary to ensure the activities of the entity. For example, a company can only operate if housing and communal services are supplied to the premises: heating, water supply. This category includes the Internet, banking services, and security company services. That is, these are services that are not directly related to the company’s activities, but are necessary to ensure its operation.
• Tax payments. Any enterprise pays taxes. The basis for their calculation can be land, social payments, salaries, property rights.

These are those semi-fixed expenses that almost every company incurs.

Advantages and disadvantages of semi-fixed expenses

Conditional-fixed spending has these advantages:

• Expenses do not change, and therefore it is easy to plan an enterprise budget.
• Easy to create a balance sheet.
• Ease of cost forecasting.
• Expenses do not appear unexpectedly.

FOR YOUR INFORMATION! Such costs also have disadvantages. Main disadvantage– expenses will have to be borne even if the company does not have adequate income. Fixed costs cannot be ignored. For example, a company rents premises for commercial activities. This month she has not received any profit, but she will still have to pay rent.

Features of accounting for semi-fixed costs

Companies have the right to write off semi-fixed costs as a debit to account 90. But this is a theory. In practice, everything is somewhat different. For current accounting of expenses, account 26 is used. This account serves to summarize information about expenses not directly related to production. It is used to reflect these directions:

• Expenses for maintaining employees whose activities are not related to manufacturing.
• Depreciation and repair costs.
• Rental payments.
• Payment for consultations and audits.

General business expenses are accounted for in the DT account 26. It corresponds with the CT account. Expenses placed on account 26 are written off to the DT of accounts 20, 23, 29. If these are semi-fixed expenses, then they will be written off to the DT of account 90.

Account 25 takes into account these expenses:

• Maintenance of the transport fleet.
• Depreciation of objects used in production.
• Property insurance.
• Payment for heating and lighting services.
• Payment for the maintenance of the premises.
• Rent payment.
• Payment of salaries to employees who are engaged in production services.

The account is used by industrial entities. Sub-accounts can be opened for it:

1. Contents of technical objects.
2. General shop expenses.

Conditionally fixed expenses recorded on subaccount 25/2 are written off in the DT of account 90.

Why is the volume of semi-fixed spending determined?

The company is recommended to calculate the amount of semi-fixed costs. This is necessary to establish the break-even point. Reaching the break-even point is the equality of the company's revenue and expenses, including semi-fixed expenses.

BY THE WAY! The established amount of semi-fixed expenses is also needed to optimize the business model. As part of optimization, those costs that can be reduced are reduced.

Determination of semi-fixed costs

Conditionally fixed expenses include costs that do not depend on the scale of production and sales. The list of these costs will be different for each enterprise. You just need to determine the necessary definitions of expenses and add them up. Typically these costs are:

• Depreciation.
• Expenses for security services.
• Property tax.
• Spending on advertising.
• Payment of rent.

The formula for calculating the totality of conditionally fixed costs is elementary. You just need to add up all the fixed costs.

Additional Information

Are loan interest and salary paid in the form of premiums classified as semi-fixed costs? This is usually true. Interest and bonuses are factors that usually do not depend on the scale of production and sales volumes. However, they may well change under the influence of other factors. Consequently, interest and bonuses may well be classified as semi-fixed expenses.

The problem with including salaries and interest in the category of regular expenses is that these areas lack an important feature - a stable size. Interest rates on loans usually change as the loan is repaid. As a rule, their size decreases. The size of the rewards also changes. It may depend on production successes and plan implementation.

That is, the issue of including premiums and interest in fixed expenses is not so clear-cut. It is recommended to solve this on an individual basis. It all depends on the state of affairs in a particular company.

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