What costs are related to variable costs
What costs are related to variable costs
Variable costs are one of the types of total costs,the volume of which depends on the volume of output. The key feature of assigning costs to variables is their absence when stopping production.
You will need
- Information on the volume of production of the enterprise, directions and amounts of costs.
Instructions
1
Variable costs are direct and indirect. Direct costs can be directly attributed to the cost of production. The main direct variable costs are raw materials costs; costs for electricity and fuel, which is consumed in the production process; costs for the wages of workers involved in the production process.
2
Indirect costs due to technologicalFeatures of production can not be directly attributed to the products produced. As an example, we can identify raw materials costs in integrated production. So, in the process of separation of milk, skim milk and cream are simultaneously obtained. Divide the cost of milk into these two types of products can be exclusively indirect.
3
The raw direct variable costs areall material costs procured on the side. Their list varies depending on the industry. These variable costs increase in proportion to the increase in output. For example, with an increase in output by 10%, the consumption of materials will also increase by the same amount. However, production increases can be achieved even if the current volume of variable costs is maintained by reducing the material intensity of production.
4
Personnel costs can be simultaneously attributed todirect and indirect, depending on the type of activity of the enterprise. If it is a question of the industrial personnel, it will be direct expenses. So, in the organization that deals with freight transport, the driver's salary will be related to direct costs, whereas in the wholesale company with its logistics distribution department - to indirect costs. Variable costs for staff appear with a piece-rate pay, i.e. when the salary of employees directly depends on the amount of work performed by them. The increase in output can lead to a proportional increase in variable staff costs, for example, with the expansion of staff. But it happens that the costs are growing faster than the release rates. For example, with the introduction of a night shift of production, the salary of employees becomes higher.
5
Assigning depreciation to variable costsIt is possible only if it is accrued by the production method, depending on the number of units manufactured. With this approach, it can easily be attributed to the cost of the product. When calculating the amortization in equal parts, it refers to the constant costs.
6
The cost of electricity can be attributed tomixed costs. If it is a question of consumption of the electric power by the industrial equipment then they can be carried to variables, and expenses for illumination of administrative and industrial buildings - to constant.
7
In trading activities, variable commissions can include commission from sales, as well as the quantity of purchased products for resale.
