Costs that depend on the volume of production. The dependence of fixed costs on the volume of production. Costs charged per unit of output

The dependence of average fixed costs on changes in the volume of production is shown in Figure 2.

Average fixed costs steadily decline as output increases. However, it is important to note that average fixed costs decrease much faster when the volume changes from 1 to 2 units than when changing the same unit, but in the range from 8 to 10 units.

variable costs (VC- English variable costs) change with the volume of output and are usually determined by this volume (Fig. 3). For example, the cost of metal used by a pipe mill would increase by 5% if pipe production increased by 5%.

The economic nature of variable costs is the costs of the practical implementation of the activities for which the enterprise was created. These include the cost of raw materials, materials, fuel, gas and electricity, labor costs 1 .

1 However, part of the costs can be strictly delimited and unconditionally attributed to fixed or variable costs. Therefore, in the domestic practice of costing, it is more common to use the concepts: conditionally fixed and conditionally variable costs.

Rice. 3. Variable cost schedule

Variable costs increase in proportion to the volume of production (with an increase in production from 1 to 2 units, variable costs increase from 50 to 78 den. units)

Average variable costs (A VC) is the ratio of variable costs (VC) to the volume of production.

The classification of costs into fixed and variable has a real economic meaning and is widely used in foreign and domestic practice to solve such management problems as:

1) assessment of the competitiveness of the enterprise;

2) regulation of the mass and increase in profits on the basis of a relative reduction in certain costs with an increase in revenue;

3) calculation of cost recovery and determination of the "margin of financial strength" of the enterprise in case of complication of market conditions or other difficulties;

4) calculation of the product price using the marginal cost method. However, the determination of the optimal pricing strategy of an enterprise in the current market conditions is possible only with further analysis of changes in costs depending on the possible volumes of production of goods. In this regard, there are gross, average and marginal costs.

The total amount of business expenses associated with the gross (cumulative) volume of production is called gross (cumulative) costs (TC– English total costs) and is equal to the sum of fixed and variable costs of the enterprise.

TS = FC + US. (3)

Gross costs determine the lower limit of the price of the goods produced (Fig. 4).

Rice. 4. Graph of gross costs

Distance between direct fixed costs (FC) and direct gross costs (TS) - is the sum of variable costs 1 .

1 In the considered cases, the cost behavior graph is represented by a straight line. However, the change in costs can also be described by a curve.

Average gross costs (AC) are the cost of production per unit of output

This type of cost is of particular importance for understanding market equilibrium, since the entrepreneur seeks to minimize them. The average cost curve usually has U-shaped form (Fig. 5). At first, the average costs are quite high. This is due to the fact that large fixed costs are allocated to a small amount of production. As production increases, fixed costs fall on an increasing number of units of production, and average costs fall rapidly, reaching a minimum at the point M.

As the volume of production increases, the main influence on the value of average costs begins to be exerted not by fixed, but by variable costs. Therefore, due to the law of diminishing returns, the curve starts to go up. Note that the average cost curve is directly related to the average fixed cost curve. (A.F.C.) and average variable costs (AVC).

The average cost curve is of great importance for the entrepreneur, since it allows you to determine at what volume of production the cost per unit of output will be minimal.

In the same industry, there are not the same, but completely different firms with different scales, organization and technical base of production, and hence with different levels costs. Comparing the average cost of a firm with the price level makes it possible to assess the position of this firm in the market.

Under conditions of perfect competition, at any prevailing price level, there is a kind of “external limit” at which producers either enter the industry or are pushed out of it. An increase in prices causes the emergence of new firms and the preservation of old ones. Price reduction leads to the fact that enterprises with high level costs become unprofitable and must leave the industry.

On fig. 6 shows three possible options for the position of the enterprise in the market. If the price line R only touches the average cost curve AS at the minimum point M(Fig. 6a), then we are dealing with the so-called marginal firm. At a given price level, it is only able to cover its minimum average costs, and it makes no difference to it whether to remain in the industry or not. Dot M in this case is the point of zero profit.

It should be emphasized that when we talk about zero profits, we do not mean that the marginal firm makes no profit at all. Production costs include not only the cost of raw materials, equipment, labor, but also the interest that firms could receive on their capital if they invested it in other industries. In other words, normal profit as a normal return on capital, determined as a result of competition in all industries with the same level of risk, or the reward of the entrepreneurial factor, is an integral part of the costs. Usually the factor of entrepreneurship is considered as permanent. In this regard, the normal profit is attributed to fixed costs.

If the average cost is below the price (Fig. 6 b), then the firm, being in equilibrium, receives an average profit higher than the normal profit, i.e. earns super profit.

Finally, if the average cost at any volume of production is higher than the market price (Fig. 6 in), then this firm suffers losses and will go bankrupt if it is not reorganized or leaves the market.

The dynamics of the average costs of the firm characterizes its position in the market, however, in itself does not determine the supply line and the point of optimal production volume. Indeed, if the average cost is below the price (Fig. 6b), then we can only assert that in the interval from Q1 before Q 3 there is a zone profitable production, and with the volume of production Q2, which corresponds to the minimum average cost, the firm receives the maximum profit per unit of product. However, does this mean that the volume of production Q2- the optimal level of production, where the firm reaches its equilibrium? The manufacturer, as you know, is not interested in profit per unit of output, but in the maximum of the total mass of the profit received. The average cost line does not show where this maximum is reached.

To understand whether it is profitable to produce an additional unit of output, the entrepreneur needs to compare the possible change in income with the change in total costs.

The cost of producing an additional unit of output is called marginal, or marginal, costs (MC - English marginal costs). These costs are sometimes referred to as incremental costs because they represent the increase in total costs that a business must incur in order to produce one more unit of output. But since fixed costs do not change with a change in the volume of output per unit of output, marginal costs are determined only by the increase in variable costs as a result of the production of an additional unit of output. Marginal cost measures how much it will cost a firm to increase its output by one unit.

In market conditions, the analysis of marginal costs plays a decisive role in the development and justification of the pricing strategy of the enterprise. Knowledge of marginal cost helps the management of the enterprise to establish:

increase or decrease output;

Which supplier of raw materials to give preference;

What are the boundaries of the production process?

To implement a well-thought-out pricing policy, each entrepreneur must calculate and deeply analyze the opportunity costs of the enterprise both in the short and long term. In the short term (no more than 1 year), there are no fundamental changes in the main factors of production (in technology, structure), while the rest of the factors can change in order to increase output. Therefore, conducting a static analysis of short-term costs is quite reasonable.

To illustrate the behavior of alternative indicators of enterprise costs in the short run, we will give a conditional example. In table. 3 shows the values ​​of the possible volumes of production of goods, data on fixed, variable and gross costs, as well as average and marginal costs.

So, in table. 3 shows various options for the production of products from 1 unit. products up to 11 units, even the case of stopping production (zero position) is provided. For all volumes of production, fixed costs remain unchanged. Variable costs increase as output increases: at extreme (small and large) volumes of production, they are more, at average values, they are less. Gross costs also increase with production growth, but at a slower rate, as they reflect the stability of fixed costs.

On fig. 7 shows a graph of curves of average and marginal costs, which reflect the data on the costs given in table. 3.

Rice. 7. The nature of the change in marginal and average costs in the short run

Average gross cost curve (AU) is always above the average variable cost curve (AVC). Gap between curves AS and ABC shows the value of average fixed costs (A.F.C.). Fixed costs are 50 rubles, and the curve of average fixed costs (A.F.C.) continuously reduced from 50 rubles. to 0. Thus, with an increase in the volume of production, the distance between the curves A C and AVC decreases.

Curve AC has the same shape as the curve AVC, although in fig. 7 she just started to curl up (because A.F.C. is decreasing for all volumes of production, the curve A C always reaches its minimum value at a higher output than the curve A VC).

If the marginal cost curve MS lies below average cost, then the average cost curve AVC(and AC) goes down if MS– above average, then the curve AKS(and AS) go up. As shown in fig. 7, the marginal cost curve MC must intersect the average cost curves (A VC and AC) at the points of their minimum values. To the left of these intersection points, marginal cost is lower than average cost, so average cost falls. To the right of the intersection points, marginal cost is higher than average cost, so average cost rises. It follows from this that the intersection of the curves should occur at the lowest value of the average cost.

When analyzing costs, it is important to note that changes in the prices of fixed and variable factors of production, and hence costs, shift the cost curves. An increase in fixed costs entails a shift in the curve FC, and consequently the curve also shifts TS by the same value (2 see Fig. 4). However, changes in fixed costs do not shift the marginal cost curve or the average variable cost curve (see Figure 5), since fixed costs only create conditions for specific business and have no effect on variable costs.

An increase in the price of a variable factor, for example, labor (see Fig. 4) shifts both curves TS and MS. Curve TS shifts due to the fact that variable costs rise with an increase in output, the curve rises similarly And VC. Marginal cost is also affected: as the cost of the variable factor increases MS will be higher for each volume of output.

Thus, summing up, it must be emphasized that marginal and average costs are important concepts in a market economy, they determine the business activity of an enterprise. The analysis of short-term costs is especially relevant for firms operating in markets with noticeable fluctuations in demand caused by various reasons.

In the long run, all the factors of production used can change in the plans of the enterprise (the size of the enterprise, the volume of production capacities, the amount of capital investments attracted, etc.), and the manager, based on cost analysis, must choose such a combination of production factors in which the costs of producing a certain volume of output would be minimal.

Such economic indicators the work of an enterprise, such as cost, profit, profitability, labor productivity, material consumption, etc., largely depend on the development of production concentration, i.e. from the volume of output. With the development of concentration, the economic performance of the enterprise, as a rule, improves to its optimal size, and then may deteriorate.

It is known that the volume of output depends on the amount of production resources involved, i.e. on the amount of variable and constant capital. But since different times are spent on changing the amount of resources used in the production process, it is necessary to distinguish between short-term and long-term periods.

At the enterprise, the volume of output can be increased due to the fullest use of capacities, in this case the goal is quickly achieved by attracting an additional amount of variable capital. If the enterprise does not have a reserve of production capacities, then in this case an increase in output requires a sufficiently long time and the attraction of not only variable, but also constant capital. In the first case, the economic effect is achieved by reducing the semi-fixed costs per unit of output.

The dependence of costs on production volumes is not clearly expressed. With the decisive influence of the production volume factor, costs are also influenced by the level of organization of production, the state of material and technical supply and the mode of saving production resources.

Variable costs depend on the volume of production, but this dependence is not always strictly direct, so they are divided into:

• - proportional (a direct proportion is observed with an increase in the cost of raw materials and materials);
• - progressive (costs with a piecework form of remuneration grow faster than the volume of production);
• - degressive (costs for process fuel, energy, repairs grow more slowly than the volume of production);
• - regressive (with an increase in the volume of production, costs decrease; an example is the fixed costs of production for one product).

Fixed production costs include administrative and operating expenses that are not directly related to production process. With a constant scale of production, they are unchanged, but with its increase they can grow abruptly, and vice versa. For example, they may vary depending on the level of wages, the cost of selling products, etc.

The total costs of the enterprise include both variable (depending on the volume of production) and fixed (overhead) costs. Algebraically, this can be represented as:

where TC is the total costs of the enterprise for a certain period;

Q - the volume of output in pieces or other natural units;

z - variable costs per unit of output;

PC - fixed costs of the enterprise for a given period.

With an increase in output and constant fixed costs, total costs will also increase. The value of the derivative will show us the rate of this growth:

those. with an increase in output by 1 unit, total costs will increase by z - the value of specific variable costs. An increase in the total costs of the enterprise with a gradual, significant increase in fixed costs (the areas of profit are shaded on the graph).

For an enterprise operating under conditions market economy, often there are economic situations associated with fluctuations in the utilization of production capacities, which entails a change in production and sales, and this, in turn, significantly affects the cost of production, and consequently, on financial results. This is related to the division of costs into fixed and variable.

This division is given great attention in the Western accounting system, which is called “direct costing”. The main provisions of this theory:

• 1. The behavior of costs depending on the change in the volume of production.
• 2. Relativity (conventionality) of the classification of costs into fixed and variable.

Depending on this classification, the total total cost of production (C) can be represented as the following formula:

where A is the amount of fixed costs;

B is the rate of variable costs per unit of output;

VBP - the volume of production.

Then the cost per unit of production (Zed) should be written as

Graphically, this can be represented as follows:

The dependence of the total cost on the volume of production

The dependence of the unit cost of production on the volume of its production

The graphs clearly show that variable costs in the cost of the entire output grow in proportion to the change in the volume of production, and in the cost of a unit of production they are a constant value.

The value of fixed costs, on the contrary, does not change with an increase in the volume of production in the total amount of costs, and per unit of production, costs decrease in proportion to its growth.

Firms, as a rule, constantly improve their production to better meet the needs of the market. During this process, they change the amount of factors of production used. Some factors they manage to change relatively quickly. For example, if there are reserve jobs, a firm can recruit new employees in a short period of time; in the presence of reserve production areas - promptly purchase an additional amount of mass-produced equipment. But in many cases, increasing the number of factors takes a long time. This happens if, in order to increase output, it is necessary to build a new plant or order a unique production complex. It was said above that, depending on how many factors a company manages to change, short-term and long-term periods can be determined in its development. In the short term, not all factors can be changed. Those factors that can be changed are called variables, and those that cannot be changed are called constants. In accordance with this division, the costs of acquiring variable factors are called variable, and the costs associated with the use of fixed factors are called fixed or fixed. In economics, production costs are called costs.

An example of a fixed cost would be a land tax on the lease of a particular piece of land. Examples of variable costs are the cost of labor, the purchase of raw materials and components, electricity, etc.

Fixed costs do not depend on the volume of production: they will be the same for the release of one unit of goods per week and thousands of units. Variable costs, on the other hand, change as output changes. As the volume of production increases, their amount increases.

The amount of fixed costs is called total fixed cost and denote TFC (total fixed, cost), and the sum of variable costs for a given volume of output - total variable cost and denote TVC (total variable cost). The total cost of production of the vehicle ( total cost) equal to the sum of the total fixed and total variable costs:

Consider, as an example, the costs of a hypothetical firm producing product X. Imagine that labor is the only variable factor. Recall that with a fixed amount of capital, the firm will eventually experience the law of diminishing returns, and labor productivity will begin to fall. We will assume that the company purchases its factors of production in a market where their prices remain constant no matter how many factors the company buys. This means that a decrease in the average productivity of labor should cause an increase in the average variable costs of production.

Table 2.4 shows the production costs of the firm in question. The fifth column is titled “Average Fixed Costs” (A.F.C. - average fixed cost). This value is obtained by dividing the total fixed costs by the volume of output (Q):

It's obvious that A.F.C. should decrease with an increase in output, since the cost of the same equipment is distributed among a large number of manufactured products. An example is the cost of running a car assembly line: the more cars that are built, the less of the cost of that line is each car.

The sixth column shows the average variable costs (AVC - average variable cost). The data placed in it are obtained by dividing the total variable costs by the quantity of goods produced:

Initially, as output increases, this value decreases. This is explained by the fact that more workers are involved in the production of a larger volume and their work can be better organized. When output reaches 5 units, the

Table 2.4

Cost of production of a hypothetical firm in the short run

	General fixed costs, rub.	General variable costs, rub.	costs,	permanent costs,	variables costs,	Average total costs, rub.	Limit costs,

nie stops. With this volume, maximum labor productivity is achieved and the ratio between variable and constant factors turns out to be optimal. A further increase in output is accompanied by an increase in the average variable cost, which is associated with a growing deficit of the constant factor. Figure 2.9 shows a graph of the change A.F.C. and AVC depending on the output.

Output volume (units)

Rice. 2.9. Graphical presentation of the data in Table. 2.4

The seventh column contains the values ​​of the average total cost ( ATS - average total cost). This value can be calculated in two ways: divide the total cost by the volume of output ( ATC = TC/Q) or sum the average fixed cost and the average variable cost (ATS = AFC + AVC).

In table 2.4, the value ATS decreases until the volume of output reaches 6 units, i.e., until the average fixed costs decrease significantly with the increase in the volume of production and the gain from this turns out to be higher than the increase in the average costs for the variable factor. After reaching 7 units. ATS

increases because the effect of spreading fixed costs over more products becomes smaller than the increase in parameter AVC.

The eighth column contains marginal cost values. This parameter is referred to as MS (marginal cost). In this case, it shows how much the total cost changes when the volume of output changes by one unit:

Marginal cost is a very important parameter, its value must be known to determine the optimal volume of output. We will return to this issue later, but for now let's look at how marginal cost is calculated. The fourth column shows that the total cost of producing 3 units. goods is equal to 15 rubles. 80 kopecks, and for the production of 4 units. - 18 rubles. 80 kop. The marginal cost of increasing output from 3 units. equal to one unit

The MC line (see Fig. 2.9) crosses the lines AVC and ATS where they reach their minimum. In the table there is no equality of the values ​​of MC and ATS at a minimum ATS due to the discrete nature of the data. The same applies to the values ​​of MC and AVC at a minimum AVC.

If we were dealing with a continuous change in the volume of production, then the lines would be smooth and the cost graphs would look like the one shown in Figure 2.10.

The volume of production is an important indicator of business development from an economic point of view. How to calculate it? What is the practical utility of knowing current production volumes? In what cases is it advisable to optimize it and by what methods can this be done?

Definition

What is production volume? This is the total number of pieces (or other units of measurement - liters, tons, etc.) of a certain industrial product produced over a certain period of time, or the dynamics of the production of products, expressed in labor or cost indicators. This indicator has practical significance in two main aspects.

Accounting expediency

Firstly, this is the provision of statistics to internal corporate structures, for accounting, for investors or, for example, a government customer. In this case, the volume of production is information that is mainly of a reference or analytical nature. Relevant data can be important for making key decisions for the enterprise in the field of management, investment, contracting, etc.

Strategic expediency

Secondly, in economics there is the concept of "optimal production volume". According to a common definition, it is an indicator that provides the enterprise with the conditions for fulfilling contracts and corresponds to the priorities in business development (or the tasks set by the owner - an individual, the state, the municipality, etc.). The key criteria here are compliance with deadlines, minimum costs, as well as the maximum level of product quality.

Production volume analysis

Let's study the first direction practical application information such as production volume. Statistical and analytical study of the relevant performance indicators of enterprises, if we talk about private business, can be aimed at informing investors and government agencies (mainly the Federal Tax Service) about the real state of affairs at the factory. What business owners should pay attention to in this direction First of all, it is a competent design of the relevant information.

In such a matter, one should be especially strict in approaching documents relating specifically to interaction with tax authorities. Thus, figures related to the volume of production must be provided according to unified forms. Such as, for example, No. 1-P ("Quarterly reporting on the release of certain types of products"), No. 16 "(Movement finished products") etc.

Units of measurement of production volume

Above, we noted that the volume of production of an enterprise can be expressed in natural terms (pieces, tons, etc.), labor or cost meters. If everything is clear with the first parameter, then what are the other two? Consider their features.

Valuation

As for the cost expression of the volume of production, the main criterion here is gross costs. They depend, in turn, on such indicators as labor intensity, resource intensity, as well as the profitability of the goods. Production volumes in this case are expressed in selling prices and are fixed, if required by the financial statements, in the form No. 1-P. VAT is usually not indicated.

Gross costs are a characteristic that implies the inclusion in statistics of both finished goods and those that are at any stage of the conveyor (but at the same time, some resources, labor, material, have already been spent to bring them to a specific stage).

Labor assessment

As for the labor assessment, here the volumes of production are expressed, as a rule, in the number of hours spent on the production of goods by certain specialists, as well as in the salary of employees. As a rule, in the relevant area of ​​statistics, as in the case of the cost criterion, finished and unfinished product samples are included.

What is the practical significance of calculating the volume of output of goods in labor terms? The fact is that working with cost indicators does not always give an objective idea of ​​the state of affairs at the factory. The main reason is the structure of manufactured goods and their prices often change. The first may be due, as some experts believe, to the fact that the enterprise may lack the necessary equipment or other necessary resources, as well as an objective increase in the cost of production of goods. Thus, labor costs can become an indicator that complements the valuation of the cost of production of goods or acts as an alternative to it.

How to determine the volume of production in hours? One of the common formulas is as follows. The total number of each type of goods is multiplied by the normalized time value allotted for the manufacture of one product.

If necessary, the indicators identified for the current year are compared with the figures of previous periods.

Note that measuring the output of goods in hours has one significant drawback: using this method, it is quite difficult to take into account the direct content of labor functions and the complexity of the work in relation to the qualifications of specialists.

Production and salary

In turn, it is possible to quite effectively measure the volume of production in wages. Using this indicator, it is possible, in turn, to differentiate labor depending on the skill level of the staff and the work functions of specialists. Calculating the volume of output of goods in wages is also quite simple. The total number of products manufactured (in physical terms) is multiplied by the established wage rate per unit of goods.

In some cases, the analysis of the volume of production is supplemented by a different kind of calculation. Such as, for example, a study of the dynamics of the shipment of goods, comparing the identified figures with planned indicators, comparing them with previous periods. Another possible component of analysis is quality. Also, in some cases, it is possible, in the context of studying the volume of output, to study figures reflecting the sale of finished products. Such actions can be useful if, for example, the task is to calculate the percentage of fulfillment of the firm's contractual obligations related to the supply of certain types of goods to consumers or partners.

Methods for studying the volume of production

How exactly can figures be used that reflect indicators of production volume in physical, value or labor terms? Among Russian economists, such a method as comparison is common. So, for example, the indicators of the current year and previous years are compared. Another popular option is to reconcile the identified figures with those contained in the production plan or in the contract signed by the enterprise.

Form No. 1-P, which, as we noted above, is often used in accounting, contains a sufficiently large number of variables to conduct a comprehensive analysis of business performance. By comparing the numbers, one can, in particular, reveal the dynamics of the output of goods, calculate the growth rate of the enterprise.

Methods for calculating the optimal volume

The second direction of the practical use of such an indicator as the volume of goods produced is the optimization of the enterprise in terms of the business model. How to determine the optimal production volume? This can be done in several ways. In the Russian economic school, there are two main ones. The first is based on working with gross indicators.

The second - on the comparison of figures belonging to the category of limiting. In this case, the calculations are carried out, as a rule, for each type of goods produced by the factory. It is also understood that the company seeks to maximize profits in the analyzed period. Another factor in the calculation: the optimal values ​​for two parameters are revealed - the price and the actual volume of production. It is assumed that other elements of the factory operation remain unchanged.

Sales volume factor

One of the methods simultaneously calculates the volume of production and sales. In other cases, the condition is allowed that the total number of goods produced is equal to the number of samples sold. That is, the dynamics of sales does not matter. Whether or not to take into account the relevant criterion depends on the type of enterprise, the specifics of the business. For example, if we are talking about retail in the consumer goods segment, then marketers, as a rule, still take into account such a factor as sales dynamics. If, for example, the company collects to order military equipment under existing contracts, the pace of implementation is usually of secondary importance.

The practice of calculating the optimal volume: accounting for implementation

We noted above that the practical usefulness of figures reflecting the volume of output of goods can be expressed in the application of appropriate indicators simultaneously with those related to sales results. When calculating the optimal production volume, we can also pay attention to this criterion. For example, a performance indicator can be identified that will result in zero profit or one that suits the firm's management in terms of profitability. In some cases, it is also possible to determine the maximum amount of profit in relation to the sale of goods and the volume of production. Which in most cases will be optimal.

Let's consider a simple example. The company manufactures tennis balls.

Let's agree that the selling price of each is 50 rubles.

Gross production costs of 1 unit - 150 rubles, 5 units - 200 rubles, 9 units - 300 rubles, 10 units - 380 rubles.

If the company sold 1 ball, then the profitability is negative, minus 100 rubles.

If 5, then positive, plus 50 rubles.

If 9, then there is also profitability, plus 150 rubles.

But if the company sold 10 units, then the profit will be only 120 rubles.

Thus, the optimal production of tennis balls is 9 units. Of course, under given criteria regarding gross costs. The formula for determining them can vary greatly depending on the specifics of production. The cost of producing additional units of goods is usually reduced per unit. However, the dynamics of their reduction is not always proportional to the number of products produced.

Limits

How to determine until what point it is advisable to increase the volume of production? Here we will be helped by the method that we also noted above. It involves the study of marginal indicators. Economists distinguish two main types - these are costs and income.

The basic rule that is recommended for business to follow is: if limit value income (per one piece of manufactured product) is higher than the size of the maximum cost, then you can continue to increase the volume of production. But in practice, in business, the factor of profitability usually plays an important role. That is, the corresponding excess of income over costs should, as an option, ensure the solvency of the company on loans. Zero profit in this case will not suit the company, since it still pays some interest to the bank.

Production growth and new employees

Is it possible to achieve profitable growth in production by attracting more and more employees? Not always. The fact is that the involvement of a new specialist in the work does not necessarily mean that the result of his work will be some specific increase in the volume of output of goods. If, for example, an enterprise begins to hire more people, but does not pay due attention to the modernization of fixed assets, average performance labor is likely to decline. And therefore, the increase in production will not be commensurate with the increase in the number of employees.

At the same time, the imbalance between the dynamics of attracting new employees and the total number of goods produced by the company is not always accompanied by a drop in business profitability. It is quite possible that the profit of the enterprise will still grow due to the increase in the number of employees, while the costs will remain unchanged (or increase slightly). This is real if, for example, the demand in the market increases, and after it, probably, the price of the goods. The company will be able to provide it in the best way by increasing the staff by several people.

A fairly common scenario in business, which reflects the dependence of the optimization of indicators of the volume of output of goods on the number of employees employed at the enterprise, is a gradual decrease in the cost of output of a unit of goods. And after reaching a certain number of manufactured units of the product - an increase in the corresponding indicator.

The cost of output of goods, which precedes the transition (from the moment of an increase or decrease in the number of manufactured units of a product) of dynamics to growth or, conversely, to a decrease, is called marginal. Changing the volume of production up or down, therefore, may not be appropriate, based on the achievement of the lowest cost indicators with the current dynamics of output.

The sum of all costs associated with the manufacture of goods is called the cost price. To make the cost of goods lower, it is necessary, first of all, to reduce production costs. To do this, it is necessary to decompose the amount of expenses into components, for example: raw materials, materials, electricity, wages, rent of premises, etc. It is necessary to consider each component separately, and reduce the costs of those expense items where possible.

Cost reduction in the production cycle is one of the important factors competitiveness of the product in the market. It is important to understand that it is necessary to reduce the cost without compromising the quality of the product. For example, if according to technology the thickness of steel should be 10 millimeters, then you should not reduce it to 9 millimeters. Consumers will immediately notice excessive savings, in which case the low price of the goods will not always be a winning position. Competitors with higher quality will have an advantage, despite the fact that their price will be slightly higher.

Types of production costs

From an accounting point of view, all costs can be divided into the following categories:

• direct costs;
• indirect costs.

Direct costs include all fixed costs that remain unchanged with an increase / decrease in the volume or quantity of goods produced, for example: renting an office building for management, loans and leasing, fund wages top management, accounting, executives.

Indirect costs include all costs incurred by the manufacturer in the manufacture of goods in all production cycles. These can be the costs of components, materials, energy resources, wage fund for workers, rent of a workshop, and so on.

It is important to understand that indirect costs will always increase with an increase in production capacity and, as a result, the quantity of goods produced will increase. Conversely, when the quantity of goods produced decreases, indirect costs decrease.

Efficient production

Each enterprise has financial plan production for a certain period of time. Production always tries to stick to the plan, otherwise it threatens to increase the cost of production. This is due to the fact that direct (fixed) costs are distributed over the number of products produced for a certain period of time. If the production did not fulfill the plan, and made a smaller amount of goods, then the total amount of fixed costs will be divided by the amount of goods produced, which will lead to an increase in its cost. Indirect costs do not provide strong influence on the formation of the cost in case of non-fulfillment of the plan, or vice versa, its overfulfillment, since the number of components or energy expended will be proportionally more or less.

The essence of any manufacturing business is to make a profit. The task of any enterprise is not only to manufacture a product, but also to effective management so that the amount of income is always greater than the total costs, otherwise the enterprise will not be able to be profitable. The greater the difference between the cost of goods and its price, the higher the margin of the business. Therefore, it is so important to conduct business with minimization of all production costs.

One of the key factors in reducing costs is the timely renewal of the equipment and machine tools. Modern equipment is many times higher than the performance of similar machines and machines of the past decades, both in terms of energy efficiency, and in terms of accuracy, productivity and other parameters. It is important to go along with the progress and make upgrades where possible. The installation of robots, smart electronics and other equipment that can replace human labor or increase line productivity is an integral part of a modern and efficient enterprise. In the long term, such a business will have advantages over competitors.