There are categories of costs that need to be taken into account when making decisions and for which data usually cannot be collected within the accounting system. Cost information accumulated within an accounting system is typically based on information about past payments or payment obligations at a specified time in the future. Sometimes, to make a decision, it is necessary to impute or impute costs that may not represent actual cash costs in the future, and these costs are called imputed costs. They can be divided as follows: opportunity costs are lost profits (loss of profit). It is due to the fact that the limited amount of produced resources can only be used in a certain way, which excludes the use of another possible option that ensures profit.
If there are more than two options for using production resources, then the opportunity cost represents the lost benefit for the best possible option that has not yet been implemented.
Opportunity cost characterizes the opportunity that is lost or sacrificed when choosing one alternative course of action requires giving up another.
For example, a company may be able to contract for the production of a special part. The production of the latter requires 100 hours of processing on machine X. The machine works at full load in the production of product A, so the contract can only be fulfilled by reducing the output of product A. This will mean a loss in income of 200 thousand rubles. The contract will also require additional variable costs in the amount of RUB 1,000 thousand.
If the company enters into a contract, it will suffer a loss in income of 200 thousand rubles. due to a decrease in the output of product A. This amount is opportunity costs and should be taken into account as part of the costs when negotiating the terms of the contract. The contract price must be set in such a way as to at least cover additional costs in the amount of 1000 thousand rubles. and 200 thousand rubles. opportunity costs (which, if the company concludes a contract, will bring benefits to it in the short term).
It is important that the concept of “opportunity costs” is applicable only in cases of limited resources. Where resources are not limited, there is no need to sacrifice something (give up something desired), as happens in the case of their shortage. If in the example machine X were operating at 80% of its potential output, then the decision to award the contract would not require a reduction in the level of production of product A. Therefore, there would be no loss in revenue, and the opportunity cost would be zero.
Let's start with a few definitions:
Costs are the costs of living and material labor for the production and sale of products, works, services:
Expenses- consumed resources or money that needs to be paid for goods or services (in domestic economic practice, the term “costs” is often used to characterize all costs of an enterprise for a certain period);
Expenses this is only that part of the costs that was incurred in connection with the generation of income, and in accordance with International Accounting Standards, expenses include losses and expenses that arise during the main activities of the enterprise in connection with the generation of income, that is, in accounting, income must be correlated with the costs of obtaining them, which in this case will be called expenses.
Let's take a closer look main types of costs:
In accordance with the accounting rules: costs accumulate in the accounts of section 3 of the Chart of Accounts (primarily in account 20 “Main production”) and, as products are produced, are moved to account 43 “Finished products”, and costs are converted into expenses only after the sale of products , that is, when moving from account 43 to account 90 “Sales”.
In simplified form we can say that expenses - this is essentially the full cost of goods sold.
Thus, if the costs incurred correspond to certain income, they can be considered expenses and reflected in the income statement. If income as a result of the costs incurred has not yet been received, the costs should be taken into account as assets and reflected in the balance sheet as costs in work in progress or finished goods (unsold).
This means that the concept of expenses is narrower than the concept of expenses. And the concepts of “costs” and “expenses” are often used as synonyms, and the term “costs” is more characteristic of economic theory, and “costs” - for accounting and management.
Cost price- these are the costs expressed in monetary form for the production and sale of products, works, and services. It consists of all costs associated with the use of natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources, as well as other production and sales costs in the production process (performance of work, provision of services).
Cost accounting and calculation (calculation) of the cost of each type of product (work, service) produced by an enterprise is one of the key problems of management accounting for a number of reasons, including the following:
- knowledge of the cost of production is necessary in order to evaluate the balances of work in progress and finished products in financial accounting, as well as to determine the cost of products sold and, as a consequence, profit from sales;
- the level of unit cost of production is a very important factor in the formation of the pricing and assortment policy of the enterprise;
- Controlling costs and identifying ways to reduce them are one of the main directions for increasing the efficiency of the company.
The system for recording production costs and calculating production costs is organized differently at each enterprise, depending on the choice of cost accounting objects - characteristics according to which production costs are grouped for the purposes of cost management. In order to effectively manage costs, as a rule, it is necessary to have data to control the areas of costs, their places of origin and cost carriers. In this case, the places where costs arise are understood as the structural divisions of the enterprise in which the initial consumption of resources occurs (for example, a workshop, site, team, stage, process, etc.), and cost carriers are the types of products (works, services) produced ( performed, provided) by this organization. In addition, there are different types of costs depending on the purposes of their accounting.
Basic and overhead costs
Based on the economic role in the production process, costs are divided into basic and overhead.
The main costs are those directly related to the production (technological) process of manufacturing products, performing work or providing services. In other words, the main costs include expended resources, the consumption of which is associated with the production of products (works, services), - for example, materials, wages of production workers, depreciation of fixed assets, etc.
Overheads are recognized as costs that arise in connection with the organization, maintenance and management of production.
For example, general production and general economic expenses - maintenance of the management apparatus, depreciation and repair of fixed assets for workshop or general plant purposes, taxes, costs of recruiting and training personnel, etc.
Direct and indirect costs
Classification of costs according to the method of their inclusion in the cost of products, works and services into direct and indirect. It is this classification that determines the order in which costs are reflected in certain synthetic accounts, subaccounts and analytical accounts.
Direct costs are those that can be directly, directly and economically attributed to a specific type of product or to a specific batch of products (work performed or services provided). In practice, this category includes:
- direct materials costs (that is, raw materials and basic materials used in the production of products);
- direct labor costs (payment of personnel involved in the production of specific types of products).
However, if an enterprise produces only one type of product or provides only one type of service, all production costs will automatically be direct.
Indirect costs are those that cannot be directly, directly and economically attributed to a specific product, so they should first be collected separately (on a separate account), and then - at the end of the month - distributed by type of product (work performed, services provided) based on the chosen techniques.
Among production costs, indirect costs include auxiliary materials and components, expenses for wages of auxiliary workers, adjusters, repairmen, vacation pay, extra pay for overtime, payment for downtime, costs for maintaining workshop equipment and buildings, property insurance, etc. d.
We emphasize - indirect costs are associated simultaneously with the production of several types of products, and they either cannot be “attributed” to a specific type of product, or in principle this is possible, but impractical due to the insignificance of the amount of this type of costs and the difficulty of accurately determining the part of them that falls on each type of product.
In practice, the separation of direct and indirect costs is very important for organizing the work of accounting in terms of cost accounting. Direct costs should be based on primary documents plus possibly additional calculations, as, for example, if the same type of raw material is used to produce several types of products in one division and it is impossible to provide accurate primary accounting of exactly how much of this raw material is spent on each from types of products, be included directly in the cost price of each type of product, formed by the debit of account 20 “Main production”. But indirect costs are collected on separate accounts - for example, shop expenses during the month are debited to account 25 “General production expenses”.
If we talk about the relationship between the two classifications considered, we can note the following:
- all direct costs are basic (after all, they are necessary for the production of specific types of products);
- overhead costs are always indirect;
- Some types of basic expenses, from the point of view of the order of their inclusion in the cost price, are not direct, but indirect - such as, for example, the amount of depreciation of fixed assets used in the production of several types of products.
Product costs, period costs
This classification is very important from the point of view of management accounting, since it is the only one used in Western countries, where many of the management accounting methods used today were developed, and such a classification is usually required in both management and financial accounting.
Figure 2. Classification of costs in management accounting
Product costs (production costs) are considered only those costs that should be included in the cost of production, at which it should be accounted for in workshops and warehouses, and if it remains unsold, reflected in the balance sheet. These are “inventory-intensive” costs directly related to the manufacture of products and, therefore, subject to accounting as part of its cost.
- raw materials and basic materials;
- remuneration of personnel involved in the production of specific types of products;
- general production costs (production overhead), including: auxiliary materials and components; indirect labor costs (salaries of support workers and repairmen, additional payments for overtime, vacation pay, etc.); other expenses - maintenance of workshop buildings, depreciation and insurance of workshop property, etc.
Period costs (periodic expenses) include those types of costs, the size of which does not depend on production volumes, but rather on the duration of the period. In practice, they are presented in two articles:
- commercial expenses - expenses associated with sales and deliveries of products (goods, works, services);
- general and administrative expenses - expenses for managing the enterprise as a whole (in Russian practice they are called “general business expenses”).
Such costs are not included in the cost of finished products, because they are not directly related to the production process, therefore they are always attributed to the period during which they were produced, and are never attributed to the balances of finished products.
When applying this classification, the full cost of products sold is formed in the following order.
Figure 3. Formation of cost in classical management accounting
If we apply this classification to domestic practice, guided by the Russian Chart of Accounts, it is necessary to organize cost accounting as follows:
1) in terms of product costs:
- direct material and labor costs are collected directly on account 20 “Main production” (according to subaccounts and analytical accounts for each type of product, work, service);
- General production expenses during the reporting period are collected in a separate account (according to the Russian Chart of Accounts, account 25 “General production expenses” is used for these purposes), and at the end of the period they are distributed and written off to account 20 “Main production” (by type of product, work, service );
- as a result, all costs recorded on the debit of account 20 “Main production” for a certain period represent total production costs, which may relate to manufactured products, forming the production cost of finished products (or to work performed, services provided, forming their cost accordingly), or may relate to work in progress balances, if any;
2) in terms of period costs:
- one must proceed from the postulate that periodic expenses are always attributed to the month, quarter or year during which they were incurred, that is, at the end of the period they are completely written off to reduce the financial result (profit), and they are never attributed to the balance of finished products on warehouse and work in progress;
- This means that they must be collected in accounts designated for these purposes (in Russia these are accounts 26 “General business expenses” and 44 “Sales expenses”), and at the end of each month the entire amount of expenses collected for the month must be written off from the credit of these accounts to the debit of the account 90 "Sales".
Please note that this option is permitted by current Russian legislation (in particular, PBU 10/99 “Organizational Expenses” and the Instructions for the Application of the Chart of Accounts). So every manager and accountant can implement this methodology into the practice of their organization.
However, in Russia, unlike IFRS and the accounting requirements of many foreign countries, this is not the only permitted option.
Thus, account 44 “Sales expenses” in Russian practice may not be closed completely “month to month”; depending on the accounting policy of the organization, a carryover debit balance may be formed on this account - for example, in terms of costs for packaging and transportation of shipped products, if it has not yet become the property of the buyer, or in terms of transportation costs in trade organizations (if part of the goods remained unsold at the end of the month).
And we can close account 26 “General business expenses” not to account 90 “Sales”, but to account 20 “Main production” (as well as 23 “Auxiliary production” and 29 “Service production and farms”, if their products, work and services are sold externally). It was this option that was used until the early nineties, and it was not canceled or completely replaced by a new option using account 90 “Sales”.
The logic of this application of the 26th account, which involves the inclusion of general business expenses in the cost of specific types of manufactured products, works, services (including for the purpose of estimating the balances of unsold products), is based on the traditional approach, according to which in domestic practice, production costs and Today, in addition to material costs, labor costs and general production expenses, many also include general business expenses (and, accordingly, non-production costs include the costs of selling products, as well as maintaining social facilities).
With this approach, the meaning put into the concept of “production cost” also changes:
- a Western accountant or manager views this type of cost as the sum of “product costs”, and in his view management costs cannot be included in production costs;
- In domestic practice, to this day, there are often not two (production and full), but three types of cost - shop, production and full, while:
- shop cost is considered to be precisely the amount of “product costs” (that is, in our country shop cost is what Western experts call production cost);
- Production cost in Russia is often understood as the sum of shop cost and general business expenses, that is, in addition to “product costs” (direct and general production expenses), it also includes management expenses, which Western experts clearly classify as “period costs”, subject to accounting only in full cost and never included in production costs;
- the concept of the full cost of goods sold is conceptually the same in both systems, although its value, other things being equal, may not coincide (if there are balances of unsold products, because then for a Russian accountant, part of the management costs may “settle” in the balance sheet in the value of the balances of finished products, and For a Western accountant, the entire amount of management expenses will be attributed month to month to the reduction of profits).
Total and specific costs
First of all, we note that costs can be cumulative and specific - depending on the volume they are calculated for (for the entire set of products, for the entire batch of products, or per unit of production).
Total expenses are expenses calculated for the entire output of an enterprise or for a separate batch of products. In other words, these are the total, total costs for a certain amount of products of the same type or even for a certain volume of products of different assortments.
Specific costs are costs calculated per unit of production.
Accordingly, the cost can be calculated per unit of product or for the entire batch, or we can talk about a general cost indicator for all types of products, works, and services for a certain period.
Depending on the specific management problem to be solved, in some cases it is important to know the amount of total costs, and in others it is important to have detailed information about specific costs (for example, when making decisions in the field of pricing and assortment policy).
Variable and fixed costs
Depending on how costs react to changes in the organization’s business activity - to an increase or decrease in production volumes - they can be divided into variable and constant.
Variable costs increase or decrease in proportion to changes in production volume, that is, they depend on the business activity of the organization. They, in turn, can be divided into:
- production variable costs: direct materials, direct labor, as well as part of overhead costs, such as the cost of auxiliary materials;
- non-production variable costs (costs of packaging and transportation of finished products, commissions to intermediaries for the sale of goods, etc.).
Fixed costs in total do not depend on the volume of production and remain unchanged during the reporting period. Examples of fixed costs are rent, depreciation of fixed assets, advertising costs, security, etc.
The point is that the total amount of fixed expenses usually does not depend on exactly how much and what kind of products the company produces in a given month. For example, if a company rented premises for a production workshop or retail outlet, it will have to pay the agreed rent every month, even if nothing is produced or sold at all in one of the months, but, on the other hand, if this premises will be operated around the clock, and not eight hours a day, the rent will not be higher. The situation is similar when advertising is given - of course, the goal is to sell more products, but the amount of advertising costs (for example, the cost of advertising agency services, the cost of advertising on television or in a newspaper, etc.) directly depends on the quantity products sold in the current month will not be affected.
But variable costs clearly respond to changes in production and sales volumes. They didn’t produce products - they didn’t have to purchase materials, pay wages to workers, etc. If the intermediary did not sell the goods, there is no need to pay him a commission (if it is set depending on the number of goods sold, as is usually done). And vice versa, if production volumes increase, it is necessary to purchase more raw materials, attract more workers, etc.
Of course, in practice, especially in the long term, all costs tend to increase (for example, rent may increase, depreciation amount may increase due to the acquisition of additional fixed assets, etc.). Therefore, expenses are sometimes called semi-variable and semi-fixed. But the growth of fixed expenses, as a rule, occurs spasmodically (stepwise), that is, after an increase in the amount of expenses, they remain at the achieved level for some time - and the reason for their growth is either an increase in prices, tariffs, etc., or a change in production volumes and sales above the “relevant level”, leading to an increase or decrease in production space and equipment.
Standard and actual expenses
From the point of view of efficiency of accounting and cost control, a distinction is made between standard and actual expenses.
Actual expenses, as their name suggests, are expenses actually incurred by an enterprise in the production of products (works, services), reflected in primary accounting documents and accounting accounts. It is these that accountants take into account, and based on them the cost of production is formed. And then they are analyzed, compared with planned indicators or indicators of previous periods and conclusions are drawn.
Standard costs are predetermined realistic costs per unit of finished product. In other words, these are costs (most often per unit of production) calculated on the basis of certain norms and standards.
Alternative (imputed) costs
Unlike financial accounting, which operates only with accomplished facts and actually incurred costs, in management accounting great importance is attached to alternative options, because, by making one management decision, the manager automatically refuses other options for the development of events, and therefore, in addition to real income and expenses, which will be received and implemented during the implementation of the decision made, alternative (imputed) costs inevitably arise, including in the form of lost profits due to the fact that the decision made excluded the possibility of alternative use of resources.
The concept of opportunity costs can also simplify decision making in some situations.
Let's look at a small example. A new potential client approached the bakery - the director of a restaurant that had recently opened nearby. He would like the bakery to supply his restaurant with buns every day that need to be baked according to a specific recipe. Of course, he is interested in the price - how much the bakery would like to receive for fulfilling such an order.
Suppose that at the moment the bakery is already working at the limit of its capacity and cannot simply bake buns for the restaurant in addition to the products that it already produces and sells to current customers, in order to begin cooperation with this restaurant, it will be necessary to reduce the production of some of the current types of products and, accordingly, reduce supplies to current customers or retail sales volumes.
Using the concept of opportunity cost, there is an elegant and simple way to solve this problem:
- of course, the price must cover the actual costs of the bakery - this means that you need to calculate the production cost of the buns that the restaurant director would like to receive; in addition, of course, the goal of the bakery is to make as much profit as possible, but this does not mean that you can set any level of profitability and ask for any price, although some amount of profit must be included in the price that will ultimately be set;
- Since in order to fulfill the restaurant's order, it will be necessary to reduce the current production of other types of products, there are alternative (imputed) costs - in this case, this is the amount of profit that the bakery will lose if it accepts this order and reduces the supply and sales of previous products, that is this is the “lost” profit that the bakery would continue to receive if it refused to cooperate with the restaurant director and worked according to the previous program;
- This means that in order to set the price for buns for a restaurant, you need to add up the sum of the costs of producing these buns (their projected cost) and the “lost” profit from the sale of those products, the production of which will be reduced due to the acceptance of an order from the restaurant.
Let's illustrate with numbers. Let's say that a restaurant wants to receive 1000 buns. To be able to bake them, you will have to reduce the production and sale of French baguettes by 400 units. Let’s assume that the production cost of a baguette is 10 rubles, and its selling price is 19 rubles. In accordance with the calculation based on the recipe for making buns, their production cost should be 4 rubles.
We make the following calculations:
- profit from the sale of one baguette is: 19 - 10 = 9 rubles;
- opportunity cost - the profit that could have been received from selling 400 baguettes if the restaurant's order had been rejected - is 9 rubles. x 400 pcs. = 3600 rub.;
- the minimum price level for buns, at which it generally makes sense to talk about the possibility of accepting this order (replacing part of the baguettes with buns), consists of the sum of the cost of the buns and this lost profit from the baguettes, that is, for a batch of 1000 buns, the restaurant must pay at least : 4 rub. x 1000 pcs. + 3600 rub. = 7600 rub.;
- The minimum price of one bun must be no lower than: 7600 rubles. / 1000 pcs. = 7.60 rub.
It's minimum. If the restaurant director is not ready to pay that amount (for example, a neighboring bakery will offer him more favorable conditions), it is better to refuse cooperation and continue to produce the products that you are already producing at the moment. After all, if you agree to a lower price, it turns out that in the end the bakery will receive less profit than it received before.
Plus, other factors must be taken into account. For example, weigh whether it makes sense to spoil or break off relations with your current clients, because reducing the production of baguettes by 400 pcs. means that someone to whom the bakery sold them before will no longer receive these baguettes! Therefore, setting the price for buns at exactly 7.60 rubles, in fact, does not make sense - this price only makes up for the same profit that you are already making with the current production program, but for this you should not sacrifice already established relationships with customers.
Sunk costs
The next important type of costs that managers and accountants who prepare information for making management decisions must take into account are sunk costs. From their name it is clear that this refers to expenses that have already been incurred in the past (as a result of the execution of one or more earlier management decisions) and which now cannot be returned or compensated. You can only come to terms with them.
It is extremely important to learn how to identify such sunk costs and mercilessly “cut off” information about them when making decisions. This approach can also simplify the procedure for analyzing alternatives and make calculations more concise and elegant.
Relevant and irrelevant costs
The concepts of alternative (opportunity) and sunk costs, as well as the behavior of various types of costs, lead us to the need to distinguish between relevant and irrelevant costs and introduce the concept of the relevance of information used to justify decisions.
Relevant information is information that distinguishes one alternative from another and, therefore, is subject to analysis and consideration when making decisions. Accordingly, relevant costs are those costs whose value will change depending on which of the alternatives is chosen as a result of the decision.
In other words, if any income, expenses or other indicators remain unchanged in any of the possible decisions, they are irrelevant and should not be taken into account when considering such a decision.
Of course, a significant part of irrelevant expenses consists of the sunk costs we have already discussed, that is, expenses that were made in the past and which no decision can change (such as, for example, the cost of geological exploration in the event that minerals are never found). have been discovered or the development of the deposit is unpromising).
Fixed costs are also often irrelevant - but here, of course, everything depends on the nature of the problem and the decision being made. For example, if the question is about what is more profitable to sew for the winter season - leather jackets or leather coats - information on the amount of depreciation of equipment, rent for production premises or the cost of electricity consumed to illuminate the workshop and ensure the operation of sewing machines has no values, because these amounts will be the same regardless of what you ultimately decide to sew. But if a more global question is being resolved about whether it is worth stopping tailoring and switching to trading fabrics, threads and accessories, information about fixed costs may become relevant - if, for example, a decision may ultimately be made to terminate the lease agreement for industrial premises and sell sewing machines.
The concept of relevance is perhaps the most important, fundamental principle of preparing information for analysis and management decisions.
Controllable and uncontrollable expenses
Well, in conclusion, there is one more important classification related to the implementation of such a management function as control.
In order to effectively control the activities of all departments and managers at all levels, as well as to ensure a properly functioning motivation system for management personnel, recently the principle of management by responsibility centers has been increasingly used, that is, by correlating costs and income with the actions of the persons responsible for them implementation.
Agree, it is stupid to deprive all employees of a bonus because the organization’s profit turned out to be lower than planned. After all, there can be many reasons, and it may even turn out that most of the employees worked hard, and the cause of the problem is a wrong decision made by only one manager. In addition, virtually no employee of an organization, as a rule, can control absolutely all the processes occurring in it. Therefore, it is simply stupid, for example, to punish the head of the sales department with a ruble for not fulfilling the sales plan, if the reason for the situation lies in the fact that the head of the production department committed technology violations and, as a result, low-quality products were produced, but the quality control department did not do this noticed, and customers were unhappy and decided to stop buying your products, made complaints, demanded a replacement product, etc. On the other hand, it is unlikely that the head of a production department will be motivated to work effectively if he is punished for poor product quality, if the main reason for the situation was the poor quality of raw materials and materials purchased externally, the quality of which should have been controlled by the company's supply department.
We will also talk in more detail about the concept of management by responsibility centers and the features of organizing planning, internal reporting and control taking into account this system in future publications. For now, we note that from a control standpoint, costs can be divided into two types:
- regulated (controlled) expenses are expenses that are subject to the influence of the manager of the responsibility center (division), that is, within his competence and authority (for example, overconsumption of materials due to violation of labor discipline or production technology is a regulated expense for the workshop manager);
- unregulated (uncontrollable) expenses are expenses that the manager of the responsibility center (division) cannot influence (for example, overconsumption of materials due to their low quality is regulated not for the workshop manager, but for the head of the supply department).
The practical application of this classification of costs makes it possible to increase the motivation of management personnel, since rewards and punishments with this method directly depend on the actual results of their activities.
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Equal to 20 den. units Each client who pays more than 20 den per day. units, has a positive effect on the amount of coverage (profit). Therefore, the hotel offers rooms for weekends for 80 den. units This is reasonable, although the hotel may not survive at 80 den. units If the hotel has spare capacity and it can be used for something else, then the minimum price is determined by opportunity costs (opportunity costs). Opportunity costs are lost profits because free capacity was not used for alternative purposes. If our hotel has an agreement with a travel company, according to which additional guests are accommodated for a short period of time for 50 den. units, then the minimum price in the short term for casual clients increases from 20 to 50 den. units If a hotel in such a situation accepted clients for 25 den. units, then she would refuse the coverage amount of 25 den. units (50 - 25). Summarizing the above, we conclude that the minimum price in the long term is equal to full costs, in the short term - variable costs, and with incomplete use of capacity - alternative (imputed) costs per unit of service (product).
Economists and managers, on the contrary, are interested in the prospects of the company. They are concerned about upcoming costs and how to reduce them and increase profitability. They must therefore be concerned with opportunity costs—the costs associated with lost opportunities to make the best use of the firm's resources. Opportunity costs include, but are not limited to, the explicit costs incurred by the firm.
Overemphasis on budget variances as a measure of management performance may result in quality and non-financial aspects not receiving adequate attention, managerial freedom being limited, and managers resorting to unnecessary cost cutting. In addition, the control of budget items by different managers requires special attention. Problems may be caused by dual responsibility, the inclusion in budget execution reports of items received as a result of distribution, as well as the need for short-term control of imputed and optional costs.
Opportunity costs are costs that will inevitably be incurred in the short term, i.e. they cannot be controlled. These include rental costs (which cannot be reduced in the near future) and most general administrative and fixed costs for computer services, as they inevitably accrue in the course of A I Ltd's day-to-day operations.
Imputed (imaginary) costs. This category is present only in management accounting. The financial accountant cannot afford to imagine any costs, since he strictly follows the principle of their documentary validity.
By accepting the order, the bakery will give up the income of 10 thousand rubles previously received from baking loaves, i.e. essentially incur losses of 10 thousand rubles. The company must take this amount into account when discussing the terms of the contract. The contract price cannot fall below 13 thousand rubles. (10 + 3). At the same time, 10 thousand rubles. - implied (imaginary) costs, or lost profits of the enterprise.
It must be borne in mind that this category of costs is applicable only in cases of limited resources, in the example given - when production capacity is fully utilized. If the baking oven was underutilized and was operating with downtime, there would be no talk of opportunity costs.
Opportunity costs are taken into account when making management decisions
Imputed (imaginary) costs are costs that an accountant-analyst needs to imagine in order to make the right management decision. Essentially, lost profits of the enterprise.
Opportunity costs are costs that are recognized in certain situations, but are usually not recognized in accounting.
Opportunity costs allow you to better reflect real situations in accounting.
Obtaining sufficient information for decision-making is achieved by grouping costs into sunk, imputed, incremental, and marginal.
Opportunity costs are expenses that are taken into account when making decisions; they arise when resources are limited. Opportunity costs are called imaginary, since they are added when making decisions, but in reality they may not exist in the future. They characterize opportunities to use production resources that are either lost or sacrificed in favor of another alternative solution. If resources are unlimited, opportunity costs are zero.
Opportunity costs are costs that are taken into account when making decisions, but may not exist in the future. They arise when resources are limited.
It should be noted that the single tax on imputed income is a fixed amount established by regulatory legal acts of legislative (representative) bodies of state power of the constituent entities of the Russian Federation for each specific organization, a certain type of activity and each separately located place of activity. It is impossible to say that a single tax is established fairly in all cases, since imputed income is the potential gross income of a single tax payer minus potentially necessary expenses, calculated taking into account the totality of factors directly affecting the receipt of such income. That is, this tax is levied not on the specific results of the organization’s activities, but on the potential expected profit. In fact, the actual results of an organization's activities may be even lower than the established tax, and organizations will operate at a loss compared to other taxation systems and, as a result, will be forced to curtail their activities.
Alternative and opportunity costs
Denying calculation as a means of calculating the cost of individual elements of a set, it is necessary to strongly emphasize the importance of calculation as a procedure for imputing a valuation on a particular object, as a means of calculating costs. And here it should be noted that the center of gravity in accounting for these costs should be transferred from units of finished products to production sites - centers of responsibility.
Imputed income is understood as the potential gross income of a single tax payer minus potentially necessary expenses, calculated taking into account the totality of factors directly affecting the receipt of such income, based on data obtained through statistical research, during audits of tax and other government bodies, and independent organizations.
However, in addition to this, the company can use certain resources that belong to it. According to our concept of opportunity costs, regardless of whether the resource is owned by the enterprise or brought in from outside, any use of this resource is associated with some costs. The costs of own and independently used resources are unpaid, hidden, or imputed costs. From the firm's point of view, these hidden (imputed) costs are equal to the monetary payments that could be received for the independently used resource in the best of all possible ways of using it.
Production costs, data on which are the basis for
imputed costs- Expenses taken into account when making a decision, but in the future they may not exist. They arise when resources are limited. Topics: accounting... Technical Translator's Guide
Internal costs, the costs of the entrepreneur himself associated with his business activities. They constitute part of the profit that an entrepreneur could receive to reimburse his own costs. See also… … Economic dictionary
EXPENSES- (English expenses) – the amount of resources expressed in monetary terms, used for certain purposes. Application of money The meter allows you to summarize the various. resources, funds that were acquired are available and are expected... ... Financial and credit encyclopedic dictionary
EXPENSES- COSTExpenditures (decrease in assets or increase in liabilities) incurred to obtain savings. benefits, usually means that can provide income. Z. can also be defined as a sacrifice made to obtain a good or service. IN… … Encyclopedia of Banking and Finance
Internal costs, the costs of the entrepreneur himself associated with his business activities. They constitute part of the profit that an entrepreneur could receive to reimburse his own costs. See also... ... Encyclopedic Dictionary of Economics and Law
opportunity costs- internal costs, the costs of the entrepreneur himself associated with his entrepreneurial activities. They constitute part of the profit that an entrepreneur could receive to reimburse his own costs... Dictionary of economic terms
COSTS IMPLIED- expenses taken into account when making a decision, but in the future they may not exist. They arise when resources are limited... Great Accounting Dictionary
Cash and opportunity costs that change in response to changes in the volume of output. Typically, variable costs include wages, fuel, materials, etc. There are proportional variables, regressive... ... Financial Dictionary
Opportunity costs represent the lost income that could have been realized if the enterprise's capital had been used in an efficient alternative way. The option of investing capital in the credit system with... ... is usually considered. Financial Dictionary
Alternative (opportunity) costs- lost profits from alternative use of the organization’s capital tied up in working capital. For example, in agriculture, where factors of production are limited, the expansion of one of its branches will cause restrictions on other branches... ... Official terminology