13. Indicators of costs and reserves ways to reduce them. Planning costs of production and sales.

Calculation of the cost of production allows to determine:

• the profitability of the enterprise as a whole and of individual products; 

• the price at which products will be implemented; 

• the feasibility of production of new products or the withdrawal from production; 

• reserves to reduce costs.

Reducing the cost of production and sales of products allows the company to:

• to obtain certain competitive advantages in the market;

• to implement its pricing policy;

• in the end - to get additional profit.

 The primary objective of cost management in the enterprise should be considered optimization of the amount and the level of costs, the provision of sufficient rate of development of production activity and the achievement of normal levels of profit. Factors influencing the formation of the cost of production:

1. Internal production factors:

• raising the technical level of production;

• improving the organization of production and labor; 

• changes in production volume.

2. Non-production factors:

• the market prices of raw materials; 

• change types and rates of tax payments, which are included in the cost of production; 

• exchange rates;

• inflation; 

• depreciation policy; 

• climatic factors, and so on

Reserves to reduce the cost of production: reduction in labor costs per unit of production by raising the productivity of labor; improved asset utilization by increasing the output per ruble of fixed assets; rational use of raw materials, fuel, energy at lower costs per unit of product without lowering the quality of production; eliminate overspending inventories, fuel, energy; reduction of losses from marriage and the elimination of non-productive expenditures; reduction of costs associated with the sale of products; reduction in management costs through efficient device of its organization.

Planning costs of production and sales

Planning costs of production and sales is important first of all to determine the optimal pricing policy of the enterprise. Necessary conditions for this are a separate planning of variable and fixed costs and determine the most cost-effective size of inventories.

 In a stable economic situation, planning of variable costs is not difficult and is carried out in two complementary ways:

• According to empirical standards consumption per unit of production; 

• According to the actual data for the reporting period of the cost of production

In turbulent economic times cost planning difficult. Under these conditions to the forefront current estimate of the cost of the variable costs and selling price adjustments depending on the level of inflation. This possible contradiction between inflation changing prices and other pricing factors. For example, the state of the effective demand of consumers or exacerbated competition does not allow manufacturers to increase the selling price in proportion to the costs.

Stages of the planning costs of production and sales of products:

I stage. Planning costs per unit of output (calculation of costs). Component cost estimate production costs, reflecting the direct calculation of the cost per unit of output in the context of calculation of articles on the basis of a valuation of costs of materials, labor, fuel, energy, use of equipment for each particular product marketable products. Calculations can be planned selling price of finished products, profits and economic efficiency of selected products;

Stage II. Determination of the total cost of the entire planned production volume. Includes:

• budgeting (plan) sales - sales volumes are determined in physical and monetary terms, the selling price per unit of goods, the cost of products sold; 

• budgeting (plan) of production - is determined by the planned volume of production in kind, which is equal to the sum of the planned sales volume (RPL) and the required number of products to the end of the year (s) minus the inventory balance at the beginning of the year .

• budgeting the cost of production and sales (consolidated account) - includes expenses by economic elements, due to the estimated volume of sales and the size of the required inventory. Determine the total cost of production for the company, planned profit, the need for working capital. The calculation is carried out by a direct method. The total costs of the enterprise is defined as the total volume of production of selected products to the full unit cost of the goods specified in the standard cost estimate; 

• the consolidated cost estimate all commodity products to verify the calculations made in costing and cost estimates; calculation is carried out by a direct method.

Stage III. Cost Planning on the volume of products sold

In the development plans need to determine which types of costs are incremental, in any production changes may also vary fixed costs and can be as significant of these changes. Calculate also change the amounts of costs for different production volumes, as their increase must be justified