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Plan of the lecture 1. Concept and types of enterprise costs 2. Product costs 3. Grouping costs of economic elements 1. Concept and types of enterprise costs Costs, expenses, costs are the most important economic categories. Their level largely determines the profit margins and profitability, the effectiveness of its business. Reduction and cost optimization are among the main directions of improving the economic performance of each company. The essence of the production costs and production costs are not identical to each other in a theoretical and practical plans, both at the level of social production, as well as in macroeconomics in the domestic and foreign practice. From the standpoint of social costs of production include the full costs of labor and materials, and equal to the cost of the product. The concept of enterprise costs varies significantly depending on their economic purpose. A clear separation of the costs of their role in reproduction is a defining moment in the theory and practice. According to him, at all levels by grouping costs, the cost of production is formed, determined by funding sources. Reproduced on the basis of the costs the company are classified into three types: • the cost of producing and selling products that make up its cost. These are the current costs to be defrayed from the proceeds from the sale of products by means of turnover of working capital; • The cost of the expansion and renovation of production. Typically, this large one-time investment of a capital nature under the new or upgraded products. They extend the applicable factors of production, increase the authorized capital. Costs consist of investments in fixed assets, working capital standard rate, the cost of the formation of additional manpower for the new production. These costs are specific sources of funding: a sinking fund, profit, issue of securities, loans and so on. • The cost of production and sale of products (works, services) are the costs of the company, expressed in monetary terms and related to the use in the production of raw materials, spare parts, fuel, energy, labor, fixed assets, intangible assets and other non-capital costs of the nature. They are included in the cost of production rate. The most general notion of the production costs of firms in foreign textbooks is defined as the cost of inputs or economic resources. All costs are accepted as an alternative (or imputed), which means that the value of any resource, selected for production, is equal to its value at the best possible use case. This is one of the most important principles of market economy. The cost of production and sale of products (works, services) are classified by a number of grounds: the role in the production process are classified into main and overhead. The main costs directly form to create products that make up its physical basis: raw materials, intermediate products, wages, etc. Overhead costs associated with servicing the production process: equipment maintenance, workshop and offsite personnel, etc.; • by way of inclusion in the cost of production costs are divided into direct and indirect. Direct costs are directly attributable to the unit cost of each type of product: raw materials, energy, technology, wages, machinists, etc. Indirect costs are allocated to individual product groups in proportion to the selected database; • Depending on the cost of changes in output, they are divided into fixed and variable. The value of the fixed costs remain the same when you change the volume of production (rent, depreciation, maintenance of buildings, etc.). Variable costs, on the contrary, increase or decrease under the influence of the dynamics of output. This group of costs is widely used in the theory of foreign microeconomics; • • the methods of accounting and cost groups are divided into simple (raw materials, wages, depreciation, energy, etc.) and complex, that is, gathered in groups or on a functional role in the production process (low value items) or at the place of costs (departmental expenses, offsite costs, etc.); • the terms used in the production of different everyday, or current, and nonrecurring costs, non-recurring costs incurred by the less than once a month. Cost of products (works, services) is the valuation used in the production of goods (works, services) of natural resources, raw materials, fuel, energy, fixed assets, labor and other costs of its production and sale. Composition and structure of costs included in cost of production. Costs that make up the cost, the economic content are grouped into the following elements: material costs, labor costs, fringe benefit expenses, amortization of fixed assets and other costs. Material costs in all sectors of the economy (excluding mining) occupy the major share of production costs. They include: raw materials, basic materials, purchased semi-finished products, fuel, energy and other raw materials. Social contributions are a form of redistribution of national income to fund social needs 1. Payments to the social insurance fund 2. Contributions to the pension fund 3. Insurance premiums to the state employment fund 4. Mandatory health insurance fund 3. Grouping costs of economic elements Grouping costs of economic elements is reflected in the estimates of costs of production and sale of products (works, services). There are going to cost to community economic content to their natural destination. . Estimated Cost includes the following elements 1) Raw materials, basic materials, purchased semifinished products, components; 2) Support and other materials 3) Fuel from the outside; 4) The energy from the outside; 5) The basic salary and additional; 6) Social contributions; 7) The depreciation of fixed assets; 8) Other cash expenses. 120 Cost ($/unit) 100 80 60 40 20 0 0 12 Output (units/yr) Cost Curves for a Firm TC Total cost is the vertical sum of FC and VC. VC Variable cost increases with production and the rate varies with increasing & decreasing returns. Fixed cost does not vary with output 50 FC 1. 2. 3. 4. Costs Production costs Types of costs Expenses of the enterprise 5. Cash expenditures 6. The cost of sales 7. Fixed costs 8. Variable costs 9. Costs of production 10.Classification of costs 11. Direct costs 12. Product costs 13. The composition and structure of costs 14. Material expenditures 15. The cost of wages 16. Other costs 17. Expenses grouping 18. Estimated charges 19. Marginal costs