Variable costs are a significant factor for the manufacturer.

In the organization of any production costs appear, the size of which is part of the cost of production. Variable costs are included in the costs, their distinguishing feature is the complete dependence on the volume of production. As a rule, the size of such costs is influenced by the elasticity of supply and demand in the commodity market.

variable costs

Essence of variable costs

The division of enterprise costs into fixed and variable is a prerequisite for accounting for factors affecting the profitability of products. Variable costs are the expenses of an enterprise, which completely change depending on the quantity of goods and services produced (costs of raw materials for manufacturing products, component materials, labor remuneration for workers, etc.). The main feature of this type of cost is shown after overcoming the break-even point, at this point the direct increase in profits will depend on the amount of their savings.

Classification of variable costs

Depending on the volume of production

Directly proportional

Material costs that limit the current volume of production

Abbreviated

Costs are reduced with an increase in the quantity of goods produced. This may be a reduction in the cost of components in the bulk of their purchase or replacement of a certain number of workers with automatic mechanisms for large volumes of production.

By way of calculation

Are common

The amount of dependent costs from the current turnover

Average

Costs per unit of production

The level of impact on cost

Straight lines

All costs that can be accurately calculated and included in the cost of production

Indirect

The costs incurred in connection with the peculiarities of the production and operation of various goods, as well as sponsoring the social and educational sphere of the enterprise

Variable cost management

Variable costs have a close relationship with the level of sales of the enterprise. At the same time, the desire to save such costs leads to a reduction in the volume of break-even products and an increase in marginal income, which has a positive effect on the profitable growth of the company.

specific variable costs

However, not all enterprises have such a relationship.To verify this, it suffices to calculate the specific variable costs. To do this, it is necessary to calculate the share of expenses that depend on the volume of production in the total amount of costs of the enterprise, and if their part is much larger than that occupied by fixed costs, the profit obtained will not be closely linked to changes in the company's revenue.

variable costs this

For effective control and management of variable costs, they are optimized with fixed costs. At the same time, it is possible to make a forecast of changes in the company's profits in accordance with the required sales volume. Such optimization allows one to adapt to the different conditions of the commodity market by regulating fixed and variable costs, and also to avoid the detrimental effect of an unfavorable market situation.

Related news

Variable costs are a significant factor for the manufacturer image, picture, imagery


Variable costs are a significant factor for the manufacturer 21


Variable costs are a significant factor for the manufacturer 69


Variable costs are a significant factor for the manufacturer 73


Variable costs are a significant factor for the manufacturer 18


Variable costs are a significant factor for the manufacturer 27


Variable costs are a significant factor for the manufacturer 59


Variable costs are a significant factor for the manufacturer 83


Variable costs are a significant factor for the manufacturer 42