Production costs - Economic theory (Golovachev A.S.). Main types of production costs

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10.11 Types of costs

When we considered the periods of production of a firm, we talked about the fact that in the short run the firm may not change all the factors of production used, while in the long run all factors are variable.

It is these differences in the ability to change the volume of resources with a change in the volume of production that led economists to break down all types of costs into two categories:

fixed costs;
variable costs.

fixed costs(FC, fixed cost) - these are those costs that cannot be changed in the short run, and therefore they remain the same with small changes in the volume of production of goods or services. Fixed costs include, for example, rent for premises, costs associated with the maintenance of equipment, repayment of previously received loans, as well as various administrative and other overhead costs. For example, it is impossible to build a new oil refinery within a month. Therefore, if an oil company plans to produce 5% more gasoline next month, then this is possible only at existing production facilities and with existing equipment. In this case, a 5% increase in output will not lead to an increase in the cost of equipment maintenance and maintenance of production facilities. These costs will remain constant. Only the amounts of wages paid, as well as the costs of materials and electricity (variable costs) will change.

The fixed cost schedule is a horizontal straight line.

Average fixed costs (AFC, average fixed cost) are fixed costs per unit of output.

variable costs(VC, variable cost) are those costs that can be changed in the short term, and therefore they grow (decrease) with any increase (decrease) in production volumes. This category includes costs for materials, energy, components, wages.

Variable costs show such dynamics from the volume of production: up to a certain point they increase at a killing pace, then they begin to increase at an increasing pace.

The variable cost schedule looks like this:

Average variable cost (AVC) is the variable cost per unit of output.

The standard Average Variable Cost Chart looks like a parabola.

The sum of fixed costs and variable costs is total cost (TC, total cost)

TC=VC+FC

Average total cost (AC, average cost) is the total cost per unit of output.

Also, average total costs are equal to the sum of average fixed and average variables.

AC = AFC + AVC

AC graph looks like a parabola

A special place in economic analysis is occupied by marginal costs. Marginal cost is important because economic decisions usually involve marginal analysis of available alternatives.

Marginal cost (MC) is the incremental cost of producing an additional unit of output.

Since fixed costs do not affect the increment in total costs, marginal cost is also an increment in variable costs when an additional unit of output is produced.

As we have already said, formulas with a derivative in economic problems are used when smooth functions are given, from which it is possible to calculate derivatives. When we are given separate points (discrete case), then we should use formulas with ratios of increments.

The marginal cost graph is also a parabola.

Let's plot the marginal cost graph together with the graphs of average variables and average total costs:

In the above graph, you can see that AC always exceeds AVC because AC = AVC + AFC, but the distance between them gets smaller as Q increases (because AFC is a monotonically decreasing function).

You can also see on the chart that the MC chart crosses the AVC and AC charts at their lows. To substantiate why this is so, it suffices to recall the relationship between average and marginal values already familiar to us (from the “Products” section): when the marginal value is below the average, then the average value decreases with an increase in volume. When the limit value is higher than the average value, the average value increases as the volume increases. Thus, when the limit value crosses the mean value from the bottom up, the mean value reaches a minimum.

Now let's try to correlate the graphs of the general, average, and limit values:

These graphs show the following patterns.

Costs(cost) - the cost of everything that the seller has to give up in order to produce the goods.

To carry out its activities, the company incurs certain costs associated with the acquisition of the necessary production factors and the sale of manufactured products. The valuation of these costs is the cost of the firm. The most cost-effective method of production and sale of any product is considered to be the one in which the company's costs are minimized.

The concept of cost has several meanings.

Cost classification

Individual- the costs of the company itself;
Public- the total costs of society for the production of a product, including not only purely production costs, but also all other costs: environmental protection, training of qualified personnel, etc.;
production costs- these are costs directly related to the production of goods and services;
Distribution costs- associated with the sale of manufactured products.

Distribution costs classification

Additional costs circulations include the costs of bringing the manufactured products to the end consumer (storage, packaging, packaging, transportation of products), which increase the final cost of the goods.
Net distribution costs- these are costs associated exclusively with acts of sale (wages of sales workers, keeping records of trade operations, advertising costs, etc.), which do not form a new value and are deducted from the cost of goods.

The essence of costs from the standpoint of accounting and economic approaches

Accounting costs- this is the valuation of the resources used in the actual prices of their implementation. The costs of the enterprise in accounting and statistical reporting act as the cost of production.
Economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use. Essentially, all costs are opportunity costs. The task of the economist is to choose the most optimal use of resources. The economic costs of a resource chosen for the production of a good are equal to its cost (value) under the best (of all possible) options for its use.

If the accountant is mainly interested in assessing the company's activities in the past, then the economist is also interested in the current and especially the predicted assessment of the company's activities, the search for the most optimal use of available resources. Economic costs are usually greater than accounting costs. total opportunity cost.

Economic costs, depending on whether the firm pays for the resources used. Explicit and implicit costs

External costs (explicit)- these are the costs in cash that the company makes in favor of suppliers of labor services, fuel, raw materials, auxiliary materials, transport and other services. In this case, the resource providers are not the owners of the firm. Since such costs are reflected in the balance sheet and report of the company, they are essentially accounting costs.
Internal costs (implicit) is the cost of own and self-used resource. The firm considers them as the equivalent of those cash payments that would be received for a self-used resource with its most optimal use.

Let's take an example. You are the owner of a small shop that is located in a room that is your property. If you didn't have a store, you could rent out this space, say, for $100 a month. This is the internal cost. The example can be continued. When you work in your shop, you use your own labor, without, of course, receiving any payment for it. With an alternative use of your labor, you would have a certain income.

A natural question is: what keeps you as the owner of this store? Some profit. The minimum wage required to keep someone in a given line of business is called the normal profit. Unreceived income from the use of own resources and normal profit in the sum form internal costs. So, from the standpoint of the economic approach, production costs should take into account all costs - both external and internal, including the latter and normal profit.

Implicit costs cannot be equated with so-called sunk costs. Sunk costs- these are costs that are incurred by the company once and cannot be returned under any circumstances. If, for example, the owner of an enterprise incurred certain monetary expenses to ensure that an inscription with its name and type of activity was made on the wall of this enterprise, then by selling such an enterprise, its owner is ready in advance to incur certain losses associated with the cost of the inscription.

There is also such a criterion for classifying costs as the time intervals during which they occur. The costs that a firm incurs in producing a given volume of output depend not only on the prices of the factors of production used, but also on which factors of production are used and in what quantity. Therefore, short-term and long-term periods are distinguished in the activities of the company.

(to simplify, measured in monetary terms), used in the course of the enterprise's business activities at (for) a certain time stage. Often in everyday life, people confuse these concepts (costs, costs and expenses) with the purchase price of a resource, although such a case is also possible. Costs, costs and expenses have historically not been separated in Russian. In Soviet times, economics was an "enemy" science, so there was no significant further development in this direction, except for the so-called. "Soviet economy".

In world practice, there are two main schools of understanding costs. This is a classic Anglo-American, which includes both Russian and continental, which rests on German developments. The continental approach structures the content of costs in more detail and therefore is becoming more common all over the world creating a qualitative basis for tax, accounting and management accounting, costing, financial planning and controlling.

cost theory

Clarifying the definition of concepts

To the above definition, more clarifying and delimiting definitions of concepts can be added. According to the continental definition of the movement of value flows at different levels of liquidity and between different levels of liquidity, we can make the following distinction between the concepts for negative and positive value flows of organizations:

In economics, there are four main levels of value flows in relation to liquidity (in the image from bottom to top):

1. Equity level(cash, highly liquid funds (checks ..), operational settlement accounts in banks)

payments and payments

2. Level of money capital(1. Level + accounts receivable - accounts payable)

Movement at a given level is determined costs and (financial) receipts

3. Production capital level(2. Level + production necessary subject capital (material and non-material (for example, a patent)))

Movement at a given level is determined costs and production income

4. Net worth level(3. Level + other subject capital (tangible and non-material (for example, accounting program)))

Movement at a given level is determined expenses and income

Instead of the level of net capital, you can use the concept total capital level, if we take into account other non-subject capital (for example, the company's image ..)

The movement of values between levels is usually carried out at all levels at once. But there are exceptions when only a few levels are covered, and not all. They are numbered in the picture.

I. Exceptions in the movement of value flows of levels 1 and 2 due to credit transactions (financial delays):

4) payments, not costs: repayment of credit debt (= "partial" loan repayment (NAMI))

1) costs, not payments: the appearance of credit debt (= the appearance (of US) of a debt to other participants)

6) payments, non-receipt: input of receivables (= "partial" repayment of debt by other participants for a product / service sold (by NAMI)

2) receipts, not payments: the appearance of receivables (=provision (by NAMI) of installments to pay for the product / service to other participants)

II. Exceptions in the movement of value flows of levels 2 and 4 are due to warehouse operations (material delays):

10) costs, not costs: payment for credited materials that are still in stock (=payment (by NAMI) on debit regarding "stale" materials or products)

3) expenses, not expenses: issuance of unpaid materials from the warehouse (in (OUR) production)

11) receipts, not income: pre-payment for subsequent delivery (of (OUR) "future" product by other participants)

5) revenues, non-revenues: the launch of a self-produced installation (= "indirect" future incomes will create an inflow of value of this installation)

III. Exceptions in the movement of value flows of levels 3 and 4 are due to the asynchrony between the intra-periodic and inter-periodic production (main) activities of the enterprise and the difference between the main and associated activities of the enterprise:

7) expenses, not expenses: neutral expenses (= expenses of other periods, non-production expenses and extraordinarily high expenses)

9) costs, not costs: calculation costs (=write-offs, interest on equity, renting out the company's own real estate, owner's salary and risks)

8) income, non-productive income: neutral income (=income of other periods, non-productive income and unusually high income)

It was not possible to find production incomes that would not be incomes.

financial balance

Foundation of financial balance Any organization can be simplified to name the following three postulates:

1) In the short term: superiority (or compliance) of payments over payments.
2) In the medium term: the superiority (or matching) of income over costs.
3) In the long run: the superiority (or matching) of income over expenses.

Costs are the "core" of costs (the organization's main negative value stream). Production (basic) income can be attributed to the "core" of income (the main positive value stream of the organization), based on the concept of specialization (division of labor) of organizations in one or more types of activities in society or the economy.

Cost types

Third-party company services
Other

More detailed cost structuring is also possible.

Cost types

Influence on the cost of the final product
- indirect costs
According to the relationship with the loading of production capacities
Relative to the production process
- Production costs
- Non-manufacturing costs
By constancy in time
- time-fixed costs
- episodic costs over time
By type of cost accounting
- accounting costs
- calculator costs
By subdivisional proximity to manufactured products
- overhead costs
- general business expenses
By importance to product groups
- group A costs
- group B costs
In terms of importance to manufactured products
- product 1 costs
- product 2 costs

Importance for decision making
- relevant costs
- irrelevant costs
By disposability
- avoidable costs
- fatal costs
Adjustability
- adjustable
- unregulated costs
Possible return
- return costs
- sunk costs
By behavior of costs
- incremental costs
- marginal (marginal) costs
Cost to quality ratio
- corrective action costs
- preventive action costs

Sources

Kistner K.-P., Steven M.: Betriebswirtschaftlehre im Grundstudium II, Physica-Verlag Heidelberg, 1997

Introduction

1. Costs and their types

1.2 Explicit and implicit costs

1.3 Fixed costs

1.4 Variable costs

1.5 Marginal cost

2. Estimates of the costs of the firm in the short and long run

2.1 Short term

2.2 Long term

Conclusion

Introduction

A large role in a market economy is played by firms - production units that use factors of production to create goods and services, and then sell them to other firms, households or the state. The main motive of any private enterprise is the possibility of making a profit, and the main principle of the activity of each firm is to achieve maximum profit. The theory of a market economy is based on the position that the only motive for the activity of a firm is profit maximization. Any enterprise tries not only to sell its goods at a profitable high price, but also to reduce its costs for production and sale of products. If the first source of increasing the income of the enterprise largely depends on the external conditions of the enterprise, then the second - almost exclusively on the enterprise itself, more precisely, on the degree of efficiency of the organization of the production process and the subsequent sale of manufactured goods.

The objectives of this course work is to study the costs of production, their nature and the impact of costs on profits. Production costs are now a rather serious and urgent problem today, because in the conditions of market relations the center of economic activity is moving to the main link of the entire economy - the enterprise. It is at this level that the products needed by society are created, the necessary services are provided. The most qualified personnel are concentrated at the enterprise. Here the issues of economical expenditure of resources, the use of high-performance equipment and technology are solved. The enterprise seeks to reduce to a minimum the costs (costs) of production and sales of products.

Costs reflect how much and what resources were used by the firm. For example, the cost elements for the production of products (works, services) are raw materials and materials, wages, etc. The total cost associated with the production and sale of products (works, services) is called the cost.

The cost of products (works, services) is one of the important generalizing indicators of the firm (enterprise), reflecting the efficiency of resource use; the results of the introduction of new equipment and progressive technology; improvement of the organization of labor, production and management.

Any firm seeks to obtain maximum profit at minimum total cost. Naturally, the minimum amount of total costs varies depending on the volume of production. However, the components of total costs respond differently to changes in output. This applies primarily to the cost of paying maintenance personnel and paying production workers.

The essence of the concept of economic rationalism lies in the assumption that economic entities determine, on the one hand, the benefits from their actions, and on the other hand, the costs necessary to achieve these benefits, the means and compare them in order to maximize the benefits at the given costs of the resources used (or minimize the costs necessary to obtain these benefits). Such a comparison of benefits and costs in making economic decisions makes it possible to determine the most optimal actions of a given economic entity under given conditions. In this case, the benefits are the benefits received by the given economic entity, and the costs are the benefits that the given economic entity loses during this action. The rationality of the behavior of economic entities will then consist in maximizing income from economic activity.

1. Costs and their types

Costs-a monetary expression of the costs of production factors necessary for the implementation of the company's production and marketing activities.

We say that the costs of production factors are calculated in money, since it is necessary to use a general criterion to describe various factors: working hours, kg of raw materials, kW of electricity, etc. However, their monetary valuation sometimes has certain difficulties.

Difficulties may also arise in determining the volume of production factors expended in a given period. In some cases, it is almost impossible to calculate costs with absolute accuracy. How, for example, to determine what part of the equipment purchased a year ago and designed for several years of use will be spent (depreciated) in a given specific period of time?

Therefore, we have to state that there is a certain degree of inaccuracy in calculating the costs of an enterprise. This inaccuracy can be reduced if, when choosing a calculation method, its ultimate goal is kept in mind.

In conclusion, we note that the costs described here are understood as costs, in accordance with which we are talking about the cost method, and since the costs included in the reports of the enterprise are calculated according to this method, they are sometimes referred to as accounting costs.

1.1 Opportunity cost

Sometimes it is necessary to look at costs from a different angle, in which case they are defined as opportunity costs.

Opportunity costs are understood as the costs and loss of income that arise due to giving preference when there is a choice of one of the ways to carry out business operations while refusing another possible way.

Because opportunity costs involve a choice between two possibilities, they are also called opportunity costs (or opportunity costs).

At the planning stage of a firm's business activities, the problem often arises of choosing between two or more possibilities. In this case, it is necessary to plan the costs that will entail giving preference to each of these ways of doing business, i.e. It's about future costs. By giving preference to one of the possible ways, the firm will not only bear the costs associated with this way, but will also lose (refuse, lose) something by giving up the alternative option. Therefore, when calculating the costs as a result of the implementation of economic activities in an appropriate way, it is necessary to evaluate them in terms of the loss of other opportunities. Let us explain our reasoning with an example.

Example. The owner of the company planned for 20 ... the following results:

Budget (plan) for 20..., USD

Gross proceeds 5,000,000

Cost method 4 600,000 Profit 400,000 Equity (approximately) 1,500,000

The owner will have to decide whether he will continue his business or sell the enterprise and free up equity and his personal workforce. If we consider the costs of continuing business activities by the firm, then, in accordance with the cost method, their value will be, as indicated, $ 4,600,000.

From the point of view of lost opportunities, the costs of continuing economic activity by the firm will be, dollars:

Costs in accordance with the budget 4,600,000

Loss of income (forecast) due to the loss of the owner of 300,000 the opportunity to work in another firm

Loss of possible receipt of interest payments in connection with 180,000 with the loss of the opportunity to allocate equity capital of 1,500,000 dollars in any other way (at the rate of 12% per annum)

The previously determined profit ($400,000) in fact - when calculating the costs in terms of lost opportunities - turns out not to be a profit, but a loss of $80,000: gross proceeds $5,000,000 - costs $5,080,000.

A significant part of the decisions made in enterprises consists in the choice of alternative possibilities. As follows from our example, in this case it is necessary to take into account lost opportunities. Lost opportunities become the determining factor, other things being equal. This is the literal meaning of such terms as "lost profits" in terms of lost opportunities, "lost opportunities costs", "opportunity costs" and so on.

1.2 Explicit and implicit costs

When a firm spends out-of-pocket money (i.e., withdraws money from its bank account) to pay for resources, it spends exactly as much as it takes a day to keep that resource at its disposal. Opportunity costs of this kind, which are associated with the payment of resources at the expense of the firm's cash, are called explicit costs. Often, explicit costs are divided into direct and indirect;

a) direct costs are directly related to the volume of output and change with the expansion or reduction of production. Such costs include the cost of hiring labor and purchasing raw materials, paying for electricity and heat, etc.;

b) indirect costs do not change depending on the volume of production. Indirect costs are overheads, rent payments, wages of the entrepreneur, deductions for insurance, etc.

implicit costs. The production process involves not only raw materials and labor, but also capital resources - machine tools, equipment, buildings of workshops and factories, as well as the entrepreneur's money. What are the costs of lost opportunities for capital resources?

If a firm owns some kind of capital resource (for example, a truck), then it always has an alternative to renting this resource to other firms. The largest missed opportunity to provide the capital resource in this case will be the opportunity cost of the capital resource (truck). Consequently, if the company "Vega" has a truck that gives it revenue of 1 million rubles during the year, and at the company "Orion" the same truck brings 1.1 million rubles. revenue, then when using a truck at the Vega company, the opportunity to earn 0.1 million rubles is missed. (This could be done by leasing the truck to Orion). In this regard, 0.1 million rubles. must be attributed to the costs of lost opportunities of the company "Vega".

The above example shows that only the entrepreneur himself can assess the true costs of the lost opportunity to use a machine or other capital equipment owned by the firm. To do this, he must determine whether there was a more profitable alternative to the use of capital, as well as the maximum possible, from his point of view, "missed" return on capital to be taken into account as the cost of a missed opportunity. Since such costs are internal in nature, they are not related to the payment of money from the company's account and are not taken into account in the accounting reports, they are called implicit costs.

1.3 Fixed costs

Fixed costs are understood as such costs, the amount of which in a given period of time does not directly depend on the size and structure of production and sales.

Salaries of employees 600000 Rental of premises 75000 Miscellaneous 125000 Depreciation 200000 Total 10000000

During the specified period, it is planned to produce and sell 10,000 units of this product.

Fixed costs can be divided into two groups: residual and start-up.

Residual costs include that part of the fixed costs that the enterprise continues to incur, despite the fact that production and sales have been completely stopped for some time.

Start-up costs include that part of the fixed costs that arise with the resumption of production and sales.

There is no clear distinction between residual and start-up costs. Whether to attribute this type of cost to one or another group is mainly influenced by the period for which production and sales are stopped. The longer the business interruption period, the lower the residual costs will be, as the opportunities to release various contracts (eg employment contracts and space rental contracts) increase.

For example, if the fixed costs of $ 1,500,000 are divided into residual - $ 1,100,000 and starting - $ 400,000, then this ratio can be graphically illustrated as follows (Fig. 1):

The distinction between residual and start-up costs may be of interest only in the case when the question of the expediency of a complete cessation of economic activity is being considered.

A certain amount of fixed costs is an expression of the fact that a certain potential has been created, allowing to achieve a certain volume of production and sales. If economic activity is carried out within a given volume, fixed costs will be unchanged. Expanding capacity, for example in the form of more machinery, more staff and more space, will increase fixed costs (depreciation, salaries and rent). This growth will occur in the form of leaps, for the enumerated factors of production can only be acquired in certain - indivisible - quantities.

If we are talking, for example, about downsizing in connection with the curtailment of production, then this will be possible after a certain time has passed, corresponding, among other things, to the deadline for issuing notices of dismissal. Such costs - in our case for the payment of salaries - will be called reversible.

The situation is different with a decrease in that part of the fixed costs that is associated with the fixed assets of the enterprise, for example, depreciation of machinery and equipment. Of course, you can sell part of the machine park. However, it often happens that when one firm in an industry has excess production capacity, other firms that would otherwise be potential buyers have that capacity as well. This situation leads to the fact that prices are very low, and this entails large losses for the company selling them in the form of extraordinary write-offs (amortization). Such costs - in this case, depreciation of machines, etc. - are called (by and large) irreversible. If the expansion of the firm's capacity leads to an increase in sunk costs, then this is much more risky than if these costs were reversible.

1.4 Variable costs

Variable costs are understood as costs, the total value of which for a given period of time is directly dependent on the volume of production and sales, as well as their structure in the production and sale of several types of products.

Examples of variable costs in a manufacturing enterprise are the costs of acquiring raw materials, labor, and energy needed in the production process.

In commercial enterprises, the most significant variable costs are the costs of acquiring goods. Other variable costs may include packaging costs and seller commissions.

Proportional variable costs are variable costs that vary in relatively the same proportion as production and sales.

Digressive variable costs are understood as variable costs that change in a relatively smaller proportion than production and sales.

Progressive variable costs are understood as variable costs that change in a relatively larger proportion than production and sales.

Table 1. Progressive variable costs

Under the gross costs of the enterprise is understood the sum of its fixed and variable costs.

1.5 Marginal cost

At enterprises, the question often arises of how much expansion or reduction in production and sales can justify itself. In addressing these issues, it is important to be able to calculate the growth costs of expanding economic activity and, accordingly, the contraction costs of curtailing it. Such growth and contraction costs are expressed by the general concept of "intrinsic marginal cost" (SPRIZ).

Under the actual marginal costs is understood as a change in the value of gross costs that occurred as a result of a change in the value of production and sales by 1 unit.

Often, cost changes are planned to match much larger changes in production and sales volumes. In such cases, it is not possible to calculate the actual marginal cost. Nevertheless, it is possible to calculate a value approaching the actual marginal cost, the so-called average marginal cost (hereinafter marginal cost).

Marginal cost is understood as the average value of incremental or contraction costs per unit of output arising as a result of a change in production and sales volumes by more than 1 unit.

2. Estimation of the firm's costs in the short and long run

In carrying out his activities, an entrepreneur has to make a lot of decisions: how much to buy raw materials, how many workers to hire, what technological process to choose, etc. All these decisions can be conditionally combined into three groups:

1) how best to organize production at existing production facilities;

2) what new production capacities and technological processes to choose, taking into account the achieved level of development of science and technology;

3) how best to adapt to the discoveries and inventions that make a breakthrough in technical progress.

The period of time during which the firm solves the first group of issues is called the short-term period in economic science, the second - long-term, the third - very long-term. The use of these terms should not be associated with a specific period of time. In a number of industries, let's say energy, the short-term period lasts many years, in another, for example, aerospace, the long-term period may take only a few years. The "length" of the period is determined only by the relevant group of issues to be resolved.

The behavior of the company is fundamentally different depending on which of the listed periods it operates. In the short run, the individual factors of production do not change; they are called constant (fixed) factors. These, as a rule, include such resources as industrial buildings, machines, equipment. However, it can also be land, the services of managers and qualified personnel. Economic resources that change during the production process are considered variable factors. In the long run, all input factors of production may change, but the basic technologies remain unchanged. In the course of a very long period, the underlying technologies may also change.

Let us dwell on the activities of the company in the short run.

2.1 Short term

Total costs (total cost - TC) - the total cost of producing a certain volume of products. Since in the short run a number of input factors of production (primarily capital) do not change, some part of the total costs also does not depend on the number of units of the variable resource used and on the volume of output of goods and services. Total costs that do not change as production increases in the short run are called total fixed costs (total fixed cost - TFC); total costs, which change their value with an increase or decrease in output, are total variable costs (total variable cost - TVC). Therefore, for any production volume Q, the total costs are the sum of the total fixed and total variable costs:

Fixed costs are mainly explicit indirect costs:

interest on loans taken, depreciation, insurance premiums, rent, salaries for managers. For example: when a building is built or rented, when equipment is bought, the entrepreneur assumes that they will serve him for a certain number of years before they need to be replaced with new ones. So, if it is known that the building lasts an average of 40 years, then every year 1/40 of the cost of the building is charged as fixed costs of the company. This type of cost is called depreciation and is used to cover the depreciation of the building. If it is known that this type of equipment lasts 10 years, then every year the entrepreneur charges 1/10 of the cost of the equipment as fixed costs of the company. Equipment depreciation costs are also used to cover depreciation of equipment.

The service life of machinery and equipment depends more on the rate of technological progress than on actual physical wear and tear.

If the industry is undergoing rapid development and the technology in it is changing rapidly, the fixed capital becomes obsolete and requires renewal much earlier than the period of its physical depreciation, i.e. obsolescence is observed.

Such costs will be present even if the company for some reason stops producing goods (the rent for the used premises or the debt to the bank must be paid in any case, regardless of whether the company produces products or not).

Variable costs are usually calculated per unit of output. This type of cost is also called direct or "optional" costs. Variable costs are the costs of paying employees, raw materials, auxiliary materials, fuel, electricity, etc.

The firm, wishing to achieve maximum profit, seeks to reduce costs per unit of output. In this regard, it is important to introduce the concept of average costs. Average costs (average total cost - ATC or simply average cost - AC) is the amount of total costs per unit of output. If Q is the quantity of goods produced by the firm, then

Average fixed (AFC) and average variable (AVC) costs are calculated using the formulas:

AFC = TFC / Q AVC = TVC / Q

Obviously ATC=AFC+AVC. Marginal cost is of great importance.

Marginal cost (MC) is a value that shows the increment in total costs when the volume of output changes by one additional unit:

Since fixed costs do not change and do not depend on the value of Q, the change in total costs, i.e. TC is determined by changes only in variable costs:

TC = TVC and MS = TVC / Q.

2.1.1 Cost curves in the short run

Knowing the prices of resources and the dependence of production volumes on the amount of resources used, it is possible to calculate production costs. Let's assume that in the considered example TFC = 1 million rubles, and the salary of one worker is 100 thousand rubles. Substituting these values in the table, we find the values of TC, TVC, ATC, AVC, AFC and MC and build the corresponding graphs.

This follows from the fact that

Since the release of an additional unit of goods is associated with an increase in total costs, the TC curve always has an "ascending" character for any value of Q.

The average and marginal cost curves have a different character (see Fig. 2). At the initial level (up to qa, point, a of the MC curve), marginal cost values decrease and then begin to grow steadily. This is due to the law of diminishing returns.

As long as marginal cost is less than average variable cost, the latter will fall, and when MC exceeds AVC, average cost will rise. Since fixed costs do not change, the total costs of ATC decrease as long as MC is less than ATC, but they begin to rise as soon as MC exceeds ATC. Consequently, the MC line intersects the AVC and ATC curves at their minimum points. As for the average fixed cost curve, since AFC=TFC/Q, TFC=const, the ATC values are constantly decreasing with increasing Q, and the AFC curve has the form of a hyperbola.

2.2 Long term

As we have already noted, any firm seeking to maximize profits must organize production in such a way that the cost per unit of output is minimal. This means that the long-term decision to be made should be guided by the task of minimizing costs. We will, as in the case of the short run, assume that the prices of economic resources remain unchanged. In addition, for simplicity, we will assume that only two factors are used in production - labor and capital, and in the long run both of them are variables. Let's make one more assumption: first we fix a certain volume of production and try to find the optimal ratio of labor and capital for a given volume of production. When we understand the algorithm for optimizing the use of two factors for a certain volume of production, we can find the principle of minimizing costs for any volume of output.

So, a certain volume of output q is produced for a given ratio of labor and capital. Our task is to figure out how to replace one factor of production with another in order to minimize the cost per unit of output. The firm will replace labor with capital (or vice versa) until the value of the marginal product of labor per one ruble spent on the acquisition of this factor becomes equal to the ratio of the marginal product of capital to the price of a unit of capital, that is:

mpk/pk=mpl/pl (2)

where MPl and MRC is the marginal product obtained as a result of attracting an additional unit of labor or capital to the production, Pk and Pl are the prices of a unit of capital and labor.

To understand the validity of this statement, let's consider this with an example: a unit of labor costs 250 rubles, and a unit of capital costs 100 rubles. (per month). Let the addition of one unit of capital increase the total output by 10 units (i.e., the marginal product of capital MPk = 10), and the marginal product of labor is 5 units. Then in equality (2) the left side becomes larger than the right:

It follows from this that if the entrepreneur refuses two

units of labor, he will reduce production by 10 units and release 500 rubles. With this money, he can hire one additional unit of capital (spend 100 rubles on this), which will compensate for the loss of production (will give 10 units of production). This means that by replacing two units of labor with one unit of capital (for a certain volume of output), the firm can reduce total costs by 400 rubles. However, it should be taken into account that a decrease in the volume of labor will invariably lead to an increase in the marginal product of labor (in accordance with the law of diminishing returns), and an increase in the amount of capital used, on the contrary, will cause a fall in the MRC. As a result, the left and right parts of equality (2) will become equal.

Equality (2) can be written in the following form:

MRK / mpl= RK / pl (3)

Since the prices for input factors of production do not change according to our conditions, then for the example considered above Рк I pl = 0.4

Then the ratio MRC / MPl should be equal to 0.4 for the selected volume of output.

In the long run, at a given output, the firm reaches an equilibrium in the use of input factors of production and minimizes costs, when any replacement of one factor by another does not lead to a decrease in unit costs. This happens when equality (2) or its equivalent (3) is satisfied.

Equality (2) and (3) allows us to determine the actions of the firm if the relative prices of resources begin to change. If, suppose, the relative price of labor increases, then the left side of (2) will become larger than the right, and this will force the firm to use less of the more expensive resource - labor (which will cause an increase in MPl) and more of the relatively cheap resource - capital (thus reducing MRC ) * As a result, equality (2) will be satisfied again.

So, we know how to minimize the cost per unit of output for a given volume of production. And when will the firm begin to reduce or increase the output of finished products? If resource prices are given and remain unchanged, then for each volume of production, using equalities (2) and (3), we can find the optimal combination of labor and capital in terms of minimizing average costs. Let's plot on the graph (Fig. 3) along the x-axis the volumes of output under consideration, and along the y-axis the values of average costs. For each volume of production, we indicate a point on the coordinate plane, the ordinate of which is equal to the average costs with the optimal ratio of labor and capital for a given volume of capital "(points A, B, C). If we connect all these points with one line, we get the curve of average costs in the long run period (LRAC).

As can be seen from fig. 3, the LRAC curve in the section from 0 to A decreases (i.e., with an increase in output, average costs fall), and then, with a further increase in output, average costs begin to increase again. If we assume that the prices of economic resources remain unchanged, then the initial decrease in average costs in the long run is explained by the fact that with the expansion of production, the growth rate of finished products begins to outstrip the growth rate of costs for input production factors.

This is due to the so-called economies of scale effect. Its essence lies in the fact that at the initial stage, an increase in the number of input factors of production makes it possible to increase the possibility of specialization of production and the distribution of labor. A decrease in average costs can also be caused by the use of more productive equipment, a decrease in the number of employees.

However, further expansion of production will invariably lead to the need for additional management structures (heads of departments, shifts, workshops), increased costs for the administrative apparatus, it will be more difficult to manage production, and failures will become more frequent. This will cause an increase in production costs, and the LRAC curve will increase.

The LRAC curve divides the coordinate plane into two parts: for all points below the LRAC curve (for example, point m), the corresponding output qm for the firm is unattainable at current prices for inputs (i.e., the firm can never achieve that the value of average cost at output qm was equal to Cm). For points above the LRAC curve (point n), the volume qn is achievable (but will require a large average cost).

How are the average cost curves related in the short run and long run? Consider point C on the LRAC curve. As we just said, at this point the lowest costs Cc per unit of output (i.e., the optimal ratio of labor and capital) are achieved with a production volume of qc units. To move along the LRAC curve from point C to point B, the firm must increase the amount of capital, and it takes time for economies of scale to kick in. But after all, at some interval of its activity, the company does not change machine tools and equipment, that is, we can assume that it operates in the short term. Let the firm fix its capacity and the amount of capital (in the short run it becomes a constant factor) corresponds to point C of the LRAC curve. Having one fixed factor of production and acting in the short run (SRAC1 curve), the firm can more effectively use the potential for economies of scale - quickly dispose of variable factors of production, implement a progressive division of labor faster, improve firm management. As a result, a firm with the same production capacity can increase its output to qD while reducing average costs to Cd, i.e., act more efficiently.

However, when planning activities for the future, the entrepreneur must assess the potential for expanding production. If he takes the risk and increases the amount of capital, so that the new optimal ratio of labor and capital will be reached at point B, then he may face losses at first - the volume of production will be reduced to qb. But then, using the potential economies of scale in the next short run (SRAC2 curve), the firm will achieve an increase in production to the level qe while reducing average variable costs.

This is where the opportunity costs associated with entrepreneurial risk manifest themselves: the entrepreneur who was afraid to take risks and expand production missed a benefit equal to (qe - qD) x (CD - Ce), i.e., the product of the magnitude of the resulting increase in production (qe - qd) and the amount of reduction in average costs (Cd-Cе).

The entrepreneur should always take risks and expand production when he is sure that the potential for expansion effects can reduce average costs while increasing production. At point A, a global minimum occurs, where both the corresponding SRAC3 curve and the LRAC curve itself reach their lowest values. Any attempt by the firm to simultaneously increase production and reduce average costs will fail. The opportunities for economies of scale will run out, and the entrepreneur who takes the risk of further expansion of production will fail. Hence, at point A, the firm optimizes its activities in the long run.

Conclusion

Any market consists of buyers who want to buy goods and suppliers who want to sell goods. Each of these parties seeks to satisfy their own needs as fully as possible at any price set for the product, however, each of them is at the mercy of its own constraint: buyers are constrained by the limitations of their budget, and suppliers are constrained by the limitations of their technological capabilities.

The presence of these constraining factors leads to the fact that, with all other conditions unchanged, but with a change in the price of a product, supply and demand will change. The characteristic demand curve, which reflects the dependence of the quantity of a good that buyers are willing to buy on the price of this good, is decreasing. The characteristic supply curve, which reflects the dependence of the quantity of goods that suppliers are willing to sell on the price of this product, is increasing. The specific position of the demand curve and the supply curve in the axes (price, quantity) is determined by a number of non-price demand parameters and non-price supply parameters. The degree of sensitivity of changes in supply and demand to changes in the price of a product or any non-price parameter is usually described by the elasticity coefficient. If the current market price for a given product is lower or higher than the price for which the volume of demand coincides with the volume of supply, then a shortage or surplus of the product is formed on the market, respectively, in the presence of which the tracking by buyers and suppliers of their interests to satisfy their needs as completely as possible leads to a change existing price in the direction of the equilibrium price, which does not exclude the possibility of fluctuations in the price of goods around the equilibrium value with too large adjustments to the original price.

In this work, due to the limited nature of the topic, many specific situations have remained behind the scenes in which the interaction and structure of supply and demand naturally have their own characteristics. For example, for the market of resources used for the production of another product, the principal is the profit from subsequent deliveries of finished products, and it is advisable to increase the consumption of resources (i.e., the value of demand for them) only as long as the increase in their total value due to the purchase of an additional unit of the resource is less than than the increase in income from the sale of an additional quantity of finished goods delivered due to this additional unit of purchased resource. To find out how the market (industry) long-term supply curve will behave, the influence of the growth of the industry on the prices of the resources used in this industry becomes fundamental; if, due to its increased size, the industry is able to acquire the necessary resources at lower prices, then the curve

long-term industry supply will be decreasing. Or, for example, when determining the nature of the aggregate demand curve, i.e. volumes of national production that all consumers of the country are ready to buy at different aggregate price levels, the influence of changes in the price level in the country on interest rates, inflationary expectations of consumers and demand for imported goods becomes fundamental. When determining the nature of the aggregate supply curve, the presence in the country of free resources for additional use becomes decisive.

Since the purpose of this work was a general description of the economic content of demand, supply and their interaction, the study of demand, supply and their interaction was carried out on the example of the most general simplest situation, and the above and other specific situations can be the subject of a separate study.

List of used literature

1. The Civil Code of the Russian Federation, Part I of November 30, 1994 No. 51-FZ (as amended by Federal Laws of February 20, 1996 N 18-FZ, of August 12, 1996 N 111-FZ, of July 8, 1999 N 138 FZ, of 16.04. 2001 N 45-FZ, dated 05/15/2001 N 54-FZ).

2. The Civil Code of the Russian Federation, Part II of January 26, 1996 No. 14-FZ (as amended by the Federal Laws of August 12, 1996 N 110-FZ, of October 24, 1997 N 133-FZ, of December 17, 1999 N 213 FZ).

3. The Tax Code of the Russian Federation, part I of July 31, 1998 No. 146-FZ (as amended by Federal Laws of July 9, 1999 N 154-FZ, of January 2, 2000 N 13-FZ, of August 5, 2000 N 118-FZ (as amended by 03/24/2001)).

4. The Tax Code of the Russian Federation, part II of August 5, 2000 No. 117-FZ (as amended by Federal Laws of December 29, 2000 N 166-FZ, of May 30, 2001 N 71-FZ, of August 7, 2001 N 118 FZ).

5. Abryutina M.S., Grachev A.V. Analysis of the financial and economic activity of the enterprise: Educational and practical guide. Moscow: Delo i Service Publishing House, 2001.

6. Betge Jörg. Balance science: Per. from German / Scientific editor V. D. Novodvorsky. M.: Accounting, 2000.

7. http://lib.vvsu.ru/books/Bakalavr02/page0089.asp

8. www.ido.edu.ru/ffec/econ/ec5.html

9. Bykardov L.V., Alekseev P.D. Financial and economic state of the enterprise: A practical guide. - M. PRIOR Publishing House, 2000.

10. The use of computer technology in accounting: Proc. allowance / M.V. Drutskaya, A.V. Ostroukhov, V.I. Ostroukhov; Ros. in absentia in-t textile. and light industry. - M., 2000.

12. Kondrakov N.P. Accounting: Textbook. INFRA - M, 2002.

13. Russian Statistical Yearbook, 2001.

14. Management of the organization: Textbook / Ed. A.G. Porshneva, Z.P. Rumyantseva, N.A. Solomatina. - M.: INFRA-M, 2000.

15. Finance, money circulation and credit: Textbook / Ed. prof. N.F. Samsonova. - M.: INFRA-M, 2001

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