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The price of any product depends on its initial cost, which is calculated using a special formula, taking into account a number of costs.

The cost of a product is the amount that was spent on its production. It includes the expended natural resources, raw materials, materials, fuel, energy, transportation, wages for production workers and other costs.

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The cost can be divided into the following types:

1. The definition of full cost includes all costs, including commercial costs.
2. The concept of marginal cost corresponds to the cost of one unit of production.

The cost of finished products is calculated taking into account the total cost of production and it happens:

1. Workshop. Includes the costs of all stages of production.
2. Production. Calculated by adding the shop floor and total costs of the plant.
3. Complete. It takes into account the costs not only for production, but also for transportation and sale.

The classification of cost is extensive, it can be divided into many types depending on the characteristics of production and methods of selling goods.

Calculation methods

There is no single methodology for calculating the cost. Depending on the type of product, its production and many different factors, the cost of production can be calculated in different ways.

Most often, the following costs are taken into account in the calculations:

• the cost of entrepreneurial activities of the manufacturer;
• the total cost of production and sales;
• the cost of preparing documentation for the goods;
• other expenses stipulated by the legislation;

Costs should be taken into account in the reporting period corresponding to the time of production of the goods, and not to the time of payment of all costs.

When calculating the price of a product, the cost calculation is performed. The calculation is made according to the quantity of products produced (in meters, pieces, or, in case of one-time production, a hundred meters or pieces are taken as a unit of measurement).

Costing items should reflect all stages of production, for example:

• the cost of raw materials and materials;
• fuel and energy costs;
• wages for production workers;
• total costs for the production process:
• expenses for the economic needs of the enterprise;
• business expenses;
• other costs;

All these factors are expressed in certain amounts, and taking into account them, a formula for calculating the cost is compiled.

General view and decoding

As mentioned above, there is no single calculation formula; when calculating the cost of a particular product, various factors can be taken into account.

Here is a general formula for calculating the total cost:

• PS \u003d Total Cost of Production + Cost of Selling Goods / Calculation Unit;

The cost is calculated in order to:

1. Assess profitability.
2. Set the wholesale and retail price for the product.
3. Assess the efficiency of resources used in production.
4. Calculate the potential profit of the enterprise.

The production process also includes such types of costs as fixed and variable, which must be reflected in the cost of goods. Moreover, fixed costs exist for the enterprise even when it does not produce anything.

In general, the formula for calculating the cost price looks like this:

• PS \u003d (Total production costs + Costs of selling goods) / cost unit;
• PS - total cost of production;

Total cost of production- this is the total cost of raw materials, energy, wages of workers and other costs that the production process required.

Costs for the sale of goods- the amount spent on storage, transportation, documentation for the goods.

Calculation unit- the quantity of goods, expressed in pieces or meters.

Formula calculation example

Using Excel

There are methods for calculating the cost using tables in Excel. Let us give examples of calculations.

Option 1

In cases where an organization is not able to calculate the exact cost of production, a rough estimate can be made. The planned quantity of goods and the planned costs are entered into the table and division is performed. The amount that will turn out as a result will be the unit of costs.

Example 1:

Option 2

After the company has allocated the amount necessary to produce 1 unit of goods, it is necessary to calculate the cost price by adding up the variable and fixed costs. The amount of variable costs depends on the quantity of output, and fixed costs do not change.

Example 2:

Reduction methods

There are methods by which the cost of goods can be reduced. This can be done by conducting a detailed analysis of the total cost of all production costs. In this case, you can plan measures to reduce the price of goods and calculate its optimal value.

If the analysis is carried out qualitatively and taking into account all the factors necessary for an objective assessment, then there are all opportunities to adjust the production process.

According to experts, one of the most effective ways to reduce the cost of goods is to increase.

Labor productivity- is the amount of work for a certain amount of labor costs in a given period of time.

The following factors influence labor productivity:

1. The level of qualification of employees involved in the production of products. It is better to replace untrained employees with low qualifications with qualified specialists. This will reduce the number of production workers, and hence the cost of paying wages, which also affect the cost of production.
2. Conditions of production and organization of the work process. At a manufacturing enterprise, which is equipped with modern high-tech equipment, energy costs will be significantly lower than where obsolete models of equipment are used. In addition, modern equipment will reduce the number of defects, and therefore the cost of raw materials and materials in the manufacture of goods. .

There is another way to reduce the cost of production - its essence is to cooperate and expand the specialization of the manufacturing enterprise. This will reduce the cost of administrative, management and other activities of the enterprise.

Savings on the production of goods will also allow such a measure as analysis, making the necessary changes and improving the ways in which the fixed assets of the enterprise are used.

It is also possible to revise the management structure, the staff of administrative and executive employees in the direction of reducing their number. Since the costs of the management activities of the enterprise also affect the cost of the product and are taken into account in its calculations, reducing staff and replacing quantity with quality will also lead to cost reduction and cost reduction.

In conclusion, we can say that by applying the formula for calculating the cost and taking into account the result obtained, it is possible to objectively assess the profitability of production and the main indicators of the company's activities.

The result of the calculations is an indicator of how efficiently the resources of the enterprise are used and what results are obtained by measures to improve production conditions and introduce new technologies.

Product costing is a rather important and responsible process. The effectiveness of the company's activities will largely depend on how correctly the calculation is calculated, as well as how correctly the price is set.

How to make a calculation

Almost all economists are familiar with such a term as costing. All production costs are calculated through costing. This process is necessary for most economic plan calculations. Each company is characterized by its own characteristics, so the form of costing may differ from company to company. In order to understand the form in more detail, you can download a sample calculation of the cost of production. How to make a PCP?

Let's take a metalworking company as an example. Thanks to a special form, you can identify the cost estimate for the product that the company produces, as well as determine prices for the buyer, wholesale or retail. You can also calculate the maximum discount that the organization can provide. In the relevant sections of the form, you need to enter the name of those materials, as well as services that are used to manufacture products. For all types of costs, it is necessary to put down the consumption rates and price categories. The preparation of expenditure norms is usually carried out by employees of the technology department. Price data can be obtained from the accounting department if raw materials for products are constantly purchased. In the case of new items, data can be obtained from the purchasing department.

Sample cost estimate

Product costing is essential for many businesses. This process is often laborious, so help is indispensable. Special programs can help to cope with this task. Calculations can be made on paper, but it will take a lot of time. If it is not possible to use specialized programs, you can use a sample product costing in excel format. The calculation of the cost includes not only direct costs, but also indirect ones. Direct costs include salaries of employees, raw materials costs.

Indirect costs include payment for transport, planned profit, and others. Many people wonder how it is easier to learn how to determine the cost price? It is best to start with the trading area. In this area, the cost items are somewhat less. In the calculation table, you can notice different sections. It is necessary to take any group of goods and calculate the cost price for each type of product. The last column in the form refers to the planned cost factor. With this ratio, you can determine the level of costs. It is about the costs that the company will incur for the delivery of goods.

Making a cost estimate

A special formula is used to calculate the cost. You will need to use data such as the purchase price, to which the amount of transport costs is added, and the fee in financial terms is also added. Each firm defines the planned cost differently. Much depends on what type of activity the organization is engaged in. This will also affect the costs incurred by the firm.

A product can be fully developed and in this case it remains to launch its sale. There is one important stage before the release of the goods. It is necessary to calculate the selling price of the goods as accurately as possible. It is extremely difficult to use one method of calculation, since many different theories and methods are used to form the price of goods. In order to identify the most competitive price, you will need to take into account all, even the most insignificant nuances. It is also necessary to set a price that will not frighten potential customers and buyers.

How to fill out a sample

The process of costing can cause certain difficulties. A sample of filling in the calculation of the cost of production will help you understand this process. This skill should be possessed by accountants, businessmen and people working in the economic or financial field. Costing skills will help determine the results of the economic functioning of the company. With regard to financial accounting, the cost of services rendered, as well as products sold or manufactured, is an integral and important part.

Before a product is developed, it must be planned for its creation. Before developing new products, it is necessary to calculate in advance the economics of the project. This process consists of calculating the cost price, setting the desired selling price, determining the approximate sales volume and determining the desired profit. The final cost of the product cannot be calculated in advance as accurately as possible. Even if a rather rough calculation is performed, a few useful steps can still be performed. First, it will be possible to identify sales expectations. Secondly, it will be possible to determine a price that will make the product competitive. Thirdly, it will be possible for yourself to answer the question of how much you want to earn per month from product sales.

It will also be possible to estimate the approximate level of costs at the idea stage. It will also be important to find out whether potential buyers are ready to give this or that amount for the goods. Each entrepreneur uses different methods for costing. Often, businessmen turn to professionals for help, who can be entrusted with this process for a fee.

The cost price is an important indicator, reflecting in monetary terms the actual costs for the production of products, the provision of services and the implementation of the final result. Using the cost price, you can calculate the price of a unit of goods. The indicator is formed in the conditions of a particular production and reflects individual spending, technological conditions. Each industry has its own proven calculation example. The cost of the service will allow you to get a more accurate impression of the significance of the indicator for the economic justification of efficiency, determining profitability.

Cost indicator in planning and cost reduction

To expand the scope of production, increase payments to engineering and technical personnel and workers, it is very important to save money. The result is a significant reduction in the cost of production, which affects the increase in savings to increase production capacity and increase the well-being of the employees of the enterprise.

It is impossible to overestimate the role of accounting, which at a certain stage calculates products. A special methodology for calculating the cost of services will allow timely taking care of the introduction of appropriate measures to reduce production costs, identify inefficient and inappropriate use of material resources.

Cost types

When planning and conducting cost analysis for the production of various types of final products or services, estimated cost indicators are used:

• planned;
• normative;
• actual.

The target is calculated on the basis of projected output volumes, while applying economic rules and regulations. Planned standards are obtained if the calculation of the cost of enterprise services is carried out, taking into account future values ​​of the boundary value of the costs for the production of various types of products.

A standard indicator is obtained if the cost of services in the manufacture of goods includes the mandatory application of current standards at a particular enterprise, approved by the management of estimates. In the calculation, the norms for raw material consumption are used, and the determination of the amount of wages takes place taking into account the established prices for individual work.

Actual reporting figures are identified based on accounting information after the end of the reporting period and at the end of the production cycle, as determined by the calculation example. The cost of a service includes the actual cost of producing a product or work performed. It is this that is the basis for economic future short or long periods of production.

Calculation

Calculation refers to the interaction of selected techniques and methods that allow you to calculate the cost of a unit of goods, services or work. A cost estimate is a calculation of the cost of a service. An example of its compilation allows you to show how to get the price of many independent accounting objects. Calculation is done for the monetary value of all components of the general accounting in the enterprise.

Calculation is the basis for calculating prices per unit of product, taking into account the costs of its production. Each enterprise, based on the specifics of production, adopted units of goods to be calculated. It can be 1 piece, 1 meter, sometimes tens or hundreds of parts are taken as a unit if they are produced in one cycle.

Types of costing items

Each specific calculation reflects the features of production, but in all cases certain items are common, according to which the cost of various services is calculated:

• materials, raw materials, components, fasteners;
• fuel and energy resources used in the performance of the technological cycle;
• wages of workers employed in production;
• taxes on the wages of production workers;
• expenses for the organization of general production;
• other production costs;
• private and commercial spending.

Costing object

The price of the service is determined by costing, as shown in the calculation example. The cost of the service is calculated depending on the actual price of a selected product. In this case, not only the cost of the final product is determined, but the costs for initial, intermediate cycles, as well as technological phases, can also be calculated.

In other cases, the object of calculation is the products manufactured by the enterprise at different stages of production, manufactured in various workshops and divisions, or finished works, services, goods.

Components of an accounting document

The service cost calculation, an example of which is given below for some areas, includes certain costing object data:

• Goods and work of auxiliary workshops used for the needs of the main production.
• Intermediate semi-finished products of the main divisions used in the final production stages.
• Goods of individual workshops to determine economic results.
• The release of a batch of products defined by specific conditions or a period of time.
• Units of a semi-finished product sold to other enterprises.
• Units of finished goods intended for sale on the market.

Calculation scheme

Based on the generally accepted calculation scheme, they enter data into spreadsheets. In this order, the cost of the service is calculated. Example - Excel - an electronic calculation program, which is the best suited for determining the cost of a unit of production.

The return of production waste in monetary terms is calculated as a percentage of the total amount of materials and components used. The number of percent is determined by the economic justification of production for previous periods. To find out the amount of expenses for paying additional wages, they take the main wage and calculate the percentage (with a salary of more than 200 thousand rubles, the required amount will be 10%, less than 200,000 will raise the amount to 15%).

When calculating payroll charges, the additional 10% introduced since 2015 is not taken into account. 30% of the total additional and basic salary is included. Maintenance of production equipment is considered at a rate of 5% of the size of the basic wage. The amount is 9% of the average salary. General production indicators of expenses are taken in the amount of 18% of the amount (25% of the basic salary and 75% of the additional).

The production cost is calculated as the sum of the above costs and charges, only the amount of waste returned to the warehouse is deducted from it.

Non-production costs are considered in the amount of 3% of the cost of production. The addition to the cost of the received costs is the cost of services. The calculation formula will be incomplete if the profit determined as a percentage of the total cost is not taken into account. To calculate the wholesale price, the manufacturer's profit and the total cost are added up, and VAT is determined from the resulting indicator.

Calculation of the cost of transport services

In order to profitably use the services of a transport company or company, the employing company needs to have information about the cost of 1 machine hour of the mechanism.

This indicator ultimately determines the cost of services. The calculation formula takes into account the following criteria:

• the cost of transport when putting it on the balance sheet;
• the amount of deductions for the depreciation of the mechanism;
• costs for planned and sudden repairs, maintenance and diagnostics;
• the cost of lubricants and fuels;
• the size of the salary of the driver or driver, taking into account the required deductions;
• overhead costs.

An example of calculating the cost of one machine hour

• the initial cost of a truck crane is 9.9 million rubles;
• term of use - 59 months;
• the average number of working hours per month - 164;
• approved maintenance spending rate - 20%;
• fuel consumption for 1 machine hour - 13.9 l;
• tariff rate for payment of work - 145 rubles per hour;
• the price of 1 liter of fuels and lubricants - 35.0 rubles;
• norm for 100 materials - 2.1 liters of lubricant;
• lubricant price - 155.6 rubles;
• overhead costs - 90% of the salary fund.

The cost of fuel and lubricants is calculated according to the specified norms and prices, the amount of payment according to the rates and overhead costs are added. The amount received is divided by the hours worked to determine the cost per machine hour.

Approximate calculation for bath services

The calculation of the cost of bath services is made on the example of one institution, which accommodates 45 visitors. The planned arrival of clients for the year is calculated from the number of 5,600 people. contain a salary in the amount of 825.2 thousand rubles and an accrual to the payment fund - 249,000, which in total will be 1,074.2 thousand.

Composition of workshop bath expenses

To determine the amount of additional costs for the maintenance of the workshop, they take (in thousands of rubles):

• fuel (fuel oil) for 1100;
• water by 17.5;
• electricity spent by 119.4;
• payment for sewerage by 15.2;
• general business expenses by 101.2;
• labor protection measures - 14.2.

The total amount is 1367.5 thousand rubles.

This is an approximate cost estimate for the service. The calculation example will continue with the fact that direct and workshop costs are added up, and the cost of funds for the maintenance of the bath per year is obtained - 2441.7 thousand rubles. Approximately according to this scheme, the cost of hairdressing services is calculated, an example of which consists of the same cost items as for a bath.

The cost of services of medical institutions

The technology by which the cost of medical services is calculated, using the example of a simple treatment in an outpatient clinic, is given below. For this, standard established concepts are used, namely: the time of the procedure, the number of health workers, their qualifications, and the financial costs of the necessary medicines. The cost of a simple service in the medical industry is determined by adding:

• salary of a medical worker per one procedure;
• tax charges on this amount;
• direct costs for the provision of services (medicines, equipment, dressings);
• the amount of overhead costs received, calculated according to the approved methodology.

To perform the calculation of the cost of medical services using the example of complex treatment, it is necessary to follow a certain procedure. First of all, the received costs of simple procedures that are part of complex treatment are added up, and a separate calculation is made for each of them.

Determining the cost of the whole set is calculated as a completed treatment case. For inpatient hospitals, this complete case is the cured patient. Outpatient facilities and polyclinics provide various services (examinations, procedures, massages, injections, physiotherapy tests, etc.).

In conclusion, it should be said that the calculation of the cost of the service of any institution or manufacturing enterprise is carried out without fail by accounting staff. In connection with an increase or decrease in the market value of materials, a change in the procedure for calculating wages or taxation conditions, the calculation should be carried out taking into account new data. This is necessary so that the company can clearly determine the profitability of its work, and customers or buyers receive a reasonable cost for the service provided to them or the goods purchased.

Costing is understood as the process of calculating the cost of a service (or product) based on an approved methodology, as well as the document itself, which contains data on costs. The calculation is made in order to relatively accurately determine the cost of a particular service. A sample calculation and the rules for compiling this document are described in detail in the article.

You can download a sample calculation of the cost of services at the end of the article.

The cost of the service is determined using several approaches at once: the company cannot sell it cheaper than the cost and margin, but besides, it has to be guided by the pricing policy of competitors and the effective demand of customers.

At the same time, unlike the price per unit of production (material goods), it is more difficult to determine the exact cost of the service provided, since in the case of a service it is possible to determine only an estimate of projected costs, which may vary depending on the market situation. In addition, the concept of “typical, homogeneous service” does not exist as such. Any service can include a combination of different elements, so both the cost and the consumer price can vary significantly depending on the situation.

However, in any case, the types of costs will be constant - these are:

• spending on materials and other material costs;
• depreciation;
• salary;
• social contributions, taxes;
• loan servicing;
• rent payments, etc.

In the finished costing document, all these costs can be grouped both by item and by type of cost.

Cost Calculation: Sample

The document itself is usually compiled in the form of a table that reflects direct costs (salary, taxes, social contributions) and indirect (everything else).

Costing articles can be specified in any wording - here is an example of calculating the cost of performing work on creating a regular manicure.

Also, calculations can be made in dynamics, analyzing the same indicators for different periods.

Instructions for compiling and video

Calculations are carried out in accordance with a previously developed methodology or instruction, which describes the calculation algorithm. For example, payment for educational services depends on the number of hours, as well as the degree of qualification of the teacher, which is necessarily prescribed in the relevant methodological recommendations.

In essence, a cost estimate is a detailed description of the costs associated with the provision of a “unit” of service, which can be measured in various ways:

1. Hourly rate - this is how educational services are measured.
2. By describing the result - for example, cosmetic repairs indicating the area of ​​\u200b\u200bthe room.
3. With the help of other indicators - transportation of goods over a distance of 45 km.

The cost structure will directly depend on the type of work performed. Therefore, the calculation algorithm will have its own differences. Using the example of calculations related to transport services, the instruction will look like this.

First, the cost of the service is estimated based on the cost of wages:

• drivers;
• auxiliary workers serving transport;
• managers, employees and other professionals working in the enterprise.

• repair current, capital;
• fuels and lubricants;
• depreciation of fixed assets;
• seasonal expenses (oil, tires, etc.).

Then tax payments are taken into account and other indicators are determined:

1. Profit according to plan.
2. Tariff with and without VAT.

It is usually drawn up with a description of a specific service: for example, transporting bricks can be more expensive than transporting lighter items (hay, pillows, etc.).

The simpler the service looks in terms of its implementation, the simpler the cost estimate itself will be. For example, if we are talking about the performance of artists, dance or singing groups, expenses are associated with the payment of salaries, social contributions, as well as the provision of rent of the appropriate premises.

In the production of goods, it is almost always necessary to take into account not only the cost of manufacturing a unit of output, but also possible losses at different stages of the cycle.

Calculation is also made for repair work. Typically, the volume of such services is measured by the area of ​​​​the room and other indicators (for example, slope length, ceiling area). The estimate includes costs per unit of work, indicates a specific type of activity (for example, leveling walls, painting, installing a stretch ceiling, and much more), and then gives the cost for each work and the final value.

Thus, the calculation algorithm looks like this:

1. The unit of service is determined - what kind of work is supposed to be implemented in this case (repair of 1 apartment, transportation of 5 tons of cargo over a distance of 100 km, provision of a tutor service for 10 teaching hours, etc.).
2. Clarify a detailed list of all expenses at their cost.
3. Determine the tariff with and without VAT.
4. Specify the planned profit.

Video instruction for compilation

The document is usually signed by the chief accountant, it is stamped by the company. Management is under no obligation to disclose such information to its clients. There is also no indication in the legislation as to whether it is necessary to attach a calculation to contracts with counterparties, so the decision can be made at your own discretion.

Product costing is the calculation of the sum of all production costs in terms of value. The method of calculation depends on which costs are taken into account. See examples of calculation by methods of absorbed and direct costs. Download the method of cost accounting and calculation.

The cost price can be called the cornerstone of making business decisions, so an example of calculating its cost estimate will be useful to a very wide range of users within the company:

• marketers - when determining prices for products;
• commercial director to decide on the range and launch of new products;
• production managers - when analyzing cost variances in order to identify reserves for improving efficiency;
• financial managers to determine the performance of the organization;
• top managers - when distributing bonuses and bonuses.

Costing: Definition and Technique

The cost of production is the monetary value of the resources spent on its production, such as raw materials and materials, human resources, and so on. It can be calculated as a whole for the company, production unit or workshop, for an individual product. For some companies, the calculation of the cost of an order, a technological stage, a node is relevant.

The figure shows the main accounting items for cost calculation.

In accounting includes the articles shown in the figure.

Drawing.

For trade or service companies, the plan of cost items for calculating the cost will differ slightly - there may not be an item “raw materials and materials”, there will almost certainly not be items “Returned waste” and “Losses from rejects”, “Selling expenses” can be considered as "General production" and so on.

Cost types for costing

When evaluating actual cost production or services rendered for the reporting period, actual expenses incurred for the needs of the main activity are taken into account. It is not difficult to assume that both productive reasonable expenditure of resources and unproductive ones can be included in the calculation. It is possible to assess the effectiveness of the costs incurred only by comparing the results obtained with the normative or planned ones.

Normative costing of products represents the monetary expression of the historically established technology of production. In order to the current achievable standard cost should be used, that is, the standards for which correspond to the effective functioning of the existing equipment. It takes into account the real level of equipment failure, the usual level of downtime and scrap. If the equipment is new and the statistics of its operation have not yet been developed, use the standards of the supplier company or ask the engineering company serving you. To evaluate the effectiveness, it is necessary to calculate the cost of actually produced products or services according to the standards. In this case, we will clearly see deviations in production from technology.

Planned is based on planned output values. When calculating the planned cost, both standards and data from the past period can be used. In practice, this value is often calculated in order to do at the end of the period.

How to Calculate Direct Manufacturing Cost of Products Using Excel

If you need to calculate the direct production cost of products, use the ready-made calculation model in Excel. The CFO System solution will tell you how to adapt the model to the specifics of the company: create directories, adjust the method of attributing direct costs to prime cost.

Unit costing

The main question is: what costs does the company attribute to cost per unit of output?

The answer to this question depends on the method of calculation:

• if we take into account all production costs, we use the method of calculating the full cost price for costing. Another name is the method of absorbed costs (absorption costing);
• if we take into account only direct costs, then we calculate the truncated (not full) cost using the direct costing method.

The company's financial results calculated using the direct costing method may differ from the results obtained using the full cost method. . Now let's look at both methods in more detail.

Absorption costing

When using the method of absorbed costs, direct and indirect costs, that is, all costs related to production processes, are included in the cost of production (these are accounts 20 and 25 of RAS). General business expenses (account 26 RAS) are attributed to the sale of products and are not allocated to final products.

Direct costs do not require additional transformations when transferred to products, while to allocate general production costs, the method of allocating costs based on the distribution base is used. One of the following criteria is selected as the base:

• labor of production workers (man-hours);
• operation of the main equipment (machine-hours);
• volume of output (in units);
• wage fund for production workers;
• proceeds from the sale of products;
• direct costs attributed to the product, etc.

It is good practice to pre-allocate costs to production cost centers, and only then, in proportion to the distribution base, transfer costs per unit of output. At the same time, different distribution bases can be used for different cost centers.

Absorbed costing example

The company produces two products "A" and "B". The volume of production amounted to 1,000 pieces. per month of product "A" and 200 pcs. product "B" (Table 1).

Table 1. An example of calculating the cost of production using the method of absorbed costs (rubles)

Direct costing

According to an alternative method - direct costing - when calculating the cost of production, only those costs that are directly related to production should be taken into account. The idea of ​​the direct costing approach is that the production manager controls only those costs that are related to production.

Example of direct costing calculation

In our example, we need to remove commercial expenses from the cost of products. Then for product "A" it will be 234 rubles, and for product "B" - 599 rubles (Table 2).

Table 2. Sample costing of products by direct costing method (rubles)

The situation is vital - the marketing department and the sales department of a large enterprise can generate expenses that are disproportionate to the cost of production, which will lead to losses, and when choosing the direction of cost optimization, to erroneous decisions.

In the long term - from a year - all costs are variable and it can be stated that production cannot function without commercial and other overheads .

How to avoid mistakes in direct costing

Errors in actual costing result in the risk of setting unprofitable prices for products or abandoning a profitable line of business. This solution will help determine whether the company calculates the direct cost correctly, and will also tell you how to adjust the calculation rules.

Applied methods for calculating the cost of production

In practice, a number of applied costing methods are also used:

• process method. When using it, the cost of each process involved in the production process is calculated. This is a very powerful tool for reformatting production processes. An enlarged version of the process-by-process method can be considered the step-by-step method in the primary industries.
• the order-by-order method is the only effective method for cases where production is of a single order-by-order nature, when each order is unique and the cost calculation is based on negotiations with the client about the final cost of the order.

For financial reporting under both RAS and IFRS, the full cost accounting method is used.