Every company, regardless of its size in the course of economic and financial activities using certain resources: human, material, financial.These are the resources consumed and the costs of production.They are divided into fixed costs and variable.Without them it is impossible to engage in economic activity and profit.Separation of variable and fixed costs allow competently and effectively take the most optimal management decisions, thereby increasing profitability.
Fixed costs - it's all kinds of resources aimed at the production, and regardless of its volume.Also, they do not depend on the number of services rendered or goods sold.These costs are almost always the same throughout the year.Even if a company's time to stop production or stop the provision of services, these costs do not stop.There are those fixed costs inherent in almost any enterprise:
- wages of permanent employees (salaries)
- social insurance contributions;
- rental and leasing;
- tax deductions on assets of the company;
- payment for the services of various organizations (communications, security, advertising);
- depreciation calculated on a straight line basis.
These costs will always exist as long as the company carries out its economic and financial activities.They exist regardless of whether it gets revenue or not.
Variable costs - costs of the company, which vary in proportion to the volume of produced commodity output.They are connected directly to the output.The main items of variable costs include:
- and raw materials needed for production;
- piecework salary (the tariff rates), the percentage of reward sales agents;
- the cost of purchasing from other businesses of commercial products intended for resale.
The main purpose of the variable costs is that when the company has income, perhaps their appearance.From their income, the company spends a portion of funds for the purchase of raw materials and goods.This money is spent are transformed into liquid assets, which are in stock.Interest compensation to agents, the company also pays only income received.
This division into fixed and variable costs necessary for good business management.It is used to calculate the "break-even point" of the enterprise.The lower fixed costs, so it is below.Reducing the share of such costs, and dramatically reduces the entrepreneurial risk.
Separation costs into fixed and variable widely used in the theory of microeconomics.It is also used in calculating the cost of production, to determine the proportion of specific costs as the company profitable reduction of fixed costs.Output growth of the decrease of fixed costs included in the cost per unit of production, thereby increasing profitability.This revenue growth is due to the so-called "economies of scale" that is, the larger the produced commodity output, the less it costs.
In practice also often used such a thing as fixed costs.They represent a cost element that is present during the idle time, but their value can be changed depending on the period of time now.This expenditure intersects with indirect or overhead costs that accompany the main production, but it is not directly related to it.
