Fixed costs (TFC), variable costs (TVC) and their schedules. Determination of total costs. Variable costs: an example. Types of production costs

Production costs in the short run are divided into fixed and variable.

Fixed costs (TFC) are production costs that do not depend on the firm's output and must be paid even if the firm does not produce anything. Associated with the very existence of the firm and depend on the amount of fixed resources and the corresponding prices of these resources. These include: executive salaries, loan interest, depreciation, space rent, cost of equity capital and insurance payments.

Variable costs (TVC) are such costs, the value of which varies depending on the volume of output, this is the sum of the firm's costs for variable resources used in the production process: wages of production personnel, materials, electricity and fuel, transportation costs. Variable costs increase as the volume of production increases.

General (cumulative) costs (TC) are the sum of fixed and variable costs: TC=TFC+TVC. At zero output, variable costs are zero and total costs are fixed costs. After the start of production in the short run, variable costs begin to rise, causing an increase in general costs.

The nature of the curves of total (TC) and total variable costs (TVC) is explained by the principles of increasing and diminishing returns. As returns increase, the TVC and TC curves rise to a decreasing degree, and as returns begin to fall, costs rise to an increasing degree. Therefore, to compare and determine the efficiency of production, average production costs are calculated.

Knowing the average cost of production, it is possible to determine the profitability of producing a given quantity of products.

Average production costs are the costs per unit of output. Average costs, in turn, are divided into average fixed, average variable and average total.

Average fixed costs (AFC) are fixed costs per unit of output. AFC=TFC/Q, where Q is the number of products produced. Since fixed costs do not vary with output, average fixed costs decrease as the number of products sold increases. Therefore, the AFC curve falls continuously as output rises, but does not cross the output axis.

Average Variable Costs (AVC) are the variable costs per unit of output: AVC=TVC/Q. Average variable costs are subject to the principles of increasing and decreasing returns to factors of production. The AVC curve has an arcuate shape. Under the influence of the principle of increasing returns, average variable costs initially fall, but after reaching a certain point, they begin to increase under the influence of the principle of diminishing returns.

There is an inverse relationship between variable production costs and the average product of a variable factor of production. If the variable resource is labor (L), then the average variable cost is wages per unit of output: AVC=w*L/Q (where w is the wage rate). Average product of labor APL = output per unit of factor used Q/L: APL=Q/L. Result: AVC=w*(1/APL).

Average total cost (ATC) is the cost per unit of output. They can be calculated in two ways: by dividing the total cost by the quantity produced, or by adding the average fixed and average variable costs. The AC curve (ATC) has an arcuate shape like average variable costs, but exceeds it by the amount of average fixed costs. As output increases, the distance between AC and AVC shortens due to the faster decline in AFC, but never reaches the AVC curve. The AC curve continues to fall after an AVC-trough release, because AFCs that continue to decline more than offset weak AVC gains. However, with a further increase in production, the increase in AVC begins to outstrip the decrease in AFC, and the AC curve turns up. The minimum point of the AC curve determines the most efficient and productive level of production in the short run.



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Classification of the firm's costs in the short run.

When analyzing costs, it is necessary to distinguish between costs for the entire output, i.e. general (full, total) production costs, and unit production costs, i.e. average (specific) costs.

Considering the costs of the entire output, it can be found that when the volume of production changes, the value of some types of costs does not change, while the value of other types of costs is variable.

fixed costs(FC – fixed costs) are costs that do not depend on the volume of output. These include building maintenance costs, capital repairs, administrative and management expenses, rent, property insurance payments, and certain types of taxes.

The concept of fixed costs can be illustrated in Fig. 5.1. Plot on the x-axis the amount of output (Q), and on the y-axis - costs (FROM). Then the fixed cost schedule (FC) will be a straight line parallel to the x-axis. Even when the enterprise does not produce anything, the value of these costs is not equal to zero.

Rice. 5.1. fixed costs

variable costs(VC – variable costs) are the costs, the value of which varies depending on the change in production volumes. Variable costs include the cost of raw materials, materials, electricity, wages of workers, the cost of auxiliary materials.

Variable costs increase or decrease in proportion to output (Fig. 5.2). In the initial stages of


Rice. 5.2. variable costs

production, they grow at a faster rate than manufactured products, but as the optimal output is reached (at the point Q 1) the growth rate of variable costs is decreasing. In larger firms, the unit cost of producing a unit of output is lower due to the increase in production efficiency, provided by a higher level of specialization of workers and more complete use of capital equipment, so the growth of variable costs becomes already slower than the increase in production. In the future, when the enterprise exceeds its optimal size, the law of diminishing productivity (profitability) comes into play and variable costs again begin to overtake production growth.

Law of diminishing marginal productivity (profitability) states that, starting from a certain point in time, each additional unit of a variable factor of production brings a smaller increment in total output than the previous one. This law takes place when any factor of production remains unchanged, for example, production technology or the size of the production area, and is valid only for a short period of time, and not for a long period of human existence.

Let's explain how the law works with an example. Assume that the enterprise has a fixed amount of equipment and workers work in one shift. If the entrepreneur hires additional workers, then work can be carried out in two shifts, which will lead to an increase in productivity and profitability. If the number of workers increases even more, and workers begin to work in three shifts, then productivity and profitability will increase again. But if you continue to hire workers, then there will be no increase in productivity. Such a constant factor as equipment has already exhausted its possibilities. The application of additional variable resources (labor) to it will no longer give the same effect, on the contrary, starting from this moment, the costs per unit of output will increase.

The law of diminishing marginal productivity underlies the behavior of a producer who maximizes his profit and determines the nature of the supply function of the price (supply curve).

It is important for the entrepreneur to know to what extent he can increase the volume of production so that the variable costs do not become very large and do not exceed the profit margin. The difference between fixed and variable costs is significant. A manufacturer can control variable costs by changing the volume of output. Fixed costs must be paid regardless of the volume of production and are therefore beyond the control of the administration.

General costs(TS– total costs) is a set of fixed and variable costs of the firm:

TC= FC + VC.

Total costs are obtained by summing the fixed and variable cost curves. They repeat the configuration of the curve VC, but separated from the origin by the value FC(Fig. 5.3).


Rice. 5.3. General costs

For economic analysis, average costs are of particular interest.

Average cost is the cost per unit of output. The role of average costs in economic analysis is determined by the fact that, as a rule, the price of a product (service) is set per unit of output (per piece, kilogram, meter, etc.). Comparison of average costs with the price allows you to determine the amount of profit (or loss) per unit of product and decide on the feasibility of further production. Profit serves as a criterion for choosing the right strategy and tactics of the company.

There are two types of average costs:

Average fixed costs ( AFC - average fixed costs) - fixed costs per unit of production:

AFC= FC / Q.

As the volume of production increases, fixed costs are distributed over an increasing number of products, so that average fixed costs decrease (Fig. 5.4);

Average variable costs ( ABC – average variable costs) - variable costs per unit of output:

AVC= VC/ Q.

As output grows ABC first they fall, due to the increasing marginal productivity (profitability) they reach their minimum, and then, under the influence of the law of diminishing productivity, they begin to grow. So the curve ABC has an arcuate shape (see Fig. 5.4);

average total cost ( ATS – average total costs) - total costs per unit of output:

ATS= TS/ Q.

Average cost can also be obtained by adding average fixed and average variable costs:

ATC= A.F.C.+ AVC.

The dynamics of average total costs reflects the dynamics of average fixed and average variable costs. While both are declining, the average total costs fall, but when, as output increases, the increase in variable costs begins to overtake the fall in fixed costs, the average total costs begin to rise. Graphically, average costs are represented by the summation of the curves of average fixed and average variable costs and have a U-shape (see Fig. 5.4).


Rice. 5.4. Production costs per unit of output:

MS - limit, AFC - average constants, AVC - average variables,

ATS - average total cost of production

The concepts of total and average costs are not enough to analyze the behavior of the firm. Therefore, economists use another type of cost - marginal.

marginal cost(MS – marginal costs) is the cost associated with producing an additional unit of output.

The category of marginal cost is of strategic importance because it allows you to show the costs that a firm will have to incur if it produces one more unit of output or
save in the event of a reduction in production for this unit. In other words, marginal cost is the amount that a firm can directly control.

Marginal cost is obtained as the difference between the total cost of production ( n+ 1) units and production costs n product units:

MS= TSn+1 – TSn or MS=D TS/D Q,

where D is a small change in something,

TS- general costs;

Q- volume of production.

Graphically, marginal costs are shown in Figure 5.4.

Let us comment on the main relationships between average and marginal costs.

1. Marginal cost ( MS) do not depend on fixed costs ( FС), since the latter do not depend on the volume of production, but MS are incremental costs.

2. As long as marginal costs are less than average ( MS< AC), the average cost curve has a negative slope. This means that the production of an additional unit of output reduces the average cost.

3. When marginal costs are equal to average ( MS = AC), which means that average costs have stopped decreasing, but have not yet begun to grow. This is the point of minimum average cost ( AC= min).

4. When marginal costs become greater than average ( MS> AC), the average cost curve goes up, which indicates an increase in average cost as a result of the production of an additional unit of output.

5. Curve MS crosses the average variable cost curve ( AVC) and average costs ( AC) at the points of their minimum values.

To calculate costs and evaluate the production activities of enterprises in the West and in Russia, various methods are used. In our economy, methods based on the category prime cost, including the total cost of production and sale of products. To calculate the cost, the costs are classified into direct, directly going to the creation of a unit of goods, and indirect, necessary for the functioning of the company as a whole.

Based on the previously introduced concepts of costs, or costs, we can introduce the concept added value, which is obtained by subtracting variable costs from the total income or revenue of the enterprise. In other words, it consists of fixed costs and net income. This indicator is important for assessing production efficiency.

In order to determine the total cost of production of different volumes of output and the cost per unit of output, it is necessary to combine production data included in the law of diminishing returns with information on resource prices. As already noted, over a short period of time, some resources associated with the technical equipment of the enterprise remain unchanged. The number of other resources may vary. It follows that in the short term, various types of costs can be classified as either fixed or variable.

fixed costs. Fixed costs are those costs that do not change with changes in the volume of production. Fixed costs are associated with the very existence of the company's production equipment and must be paid even if the company does not produce anything. Fixed costs typically include bond payments, bank loans, rent payments, enterprise security, utility bills (telephone, lighting, sewerage), as well as hourly wages for employees of the enterprise.

variable costs. Variables are called such costs, the value of which varies depending on changes in the volume of production. These include the cost of raw materials, fuel, energy, transportation services, most of the labor force, and so on. The amount of variable costs varies depending on the volume of production.

General costs is the sum of fixed and variable costs for any given volume of production.

General, fixed and variable costs will be shown on the graph (see Fig. 1).


At zero output, the total cost is equal to the firm's fixed costs. Then, for the production of each additional unit of output (from 1 to 10), the total cost changes by the same amount as the sum of variable costs.

The sum of variable costs varies from the origin, and the sum of fixed costs is added to the vertical dimension of the sum of variable costs each time to obtain a total cost curve.

The distinction between fixed and variable costs is significant. Variable costs are costs that can be managed quickly, their value can be changed over a short period of time by changing the volume of production. On the other hand, fixed costs are obviously out of the control of the firm's management. Such costs are mandatory and must be paid regardless of the volume of production.

In the center of the classification of costs is the relationship between the volume of production and costs, the price of a given type of goods. Costs are divided into independent and dependent on the volume of production.

fixed costs do not depend on the value of production, exist at zero volume of production. These are the previous obligations of the enterprise (interest on loans, etc.), taxes, depreciation, security payments, rent, equipment maintenance costs with zero production volume, salaries of management personnel, etc. The concept of fixed costs can be illustrated in Fig. one.

Rice. one. Fixed costs Chuev I.N., Chechevitsyna L.N. Enterprise economy. - M.: ITK Dashkov i K - 2006. - 225p.

Let's plot the quantity of output (Q) on the abscissa axis, and the costs (C) on the ordinate axis. Then the line of fixed costs will be a constant parallel to the x-axis. It is designated FC. Since with an increase in the volume of production, fixed costs per unit of production decrease, the curve of average fixed costs (AFC) has a negative slope (Fig. 2). Average fixed costs are calculated by the formula: AFC = FС/Q.

They depend on the quantity of products produced, they consist of the costs of raw materials, materials, wages for workers, etc.

As the optimal output volumes are reached (at point Q1), the growth rate of variable costs decreases. However, further expansion of production leads to an acceleration in the growth of variable costs (Fig. 3).

Rice. 3.

The sum of fixed and variable costs forms gross costs- the amount of cash costs for the production of a certain type of product.

The distinction between fixed and variable costs is essential for every businessman. Variable costs are costs that an entrepreneur can control, the value of which can be changed over a short period of time by changing the volume of production. On the other hand, fixed costs are obviously under the control of the firm's management. Such costs are mandatory and must be paid regardless of the volume of production 11 See: McConnell K.R. . 11th ed. - T. 2. - M.: Respublika, - 1992, p. 51..

To measure the cost of producing a unit of output, the categories of average, average fixed and average variable costs are used. Average cost equal to the quotient of dividing the gross cost by the amount of output. determined by dividing fixed costs by the quantity of goods produced.

Rice. 2.

Determined by dividing the variable costs by the volume of production:

AVC = VC/Q

When the optimal size of production is reached, the average variable costs become minimal (Fig. 4).

Rice. four.

Average variable costs play an important role in the analysis of the economic state of the company: its equilibrium position and development prospects - expansion, reduction in production or exit from the industry.

General costs - the total of fixed and variable costs of a firm TC = FC + VC).

Graphically, the total costs are depicted as a result of the summation of the curves of fixed and variable costs (Fig. 5).

Average total cost is the quotient of total cost (TC) divided by output (Q). (Sometimes the average total cost of ATS in the economic literature is referred to as AC):

AC (ATC) = TC/Q.

Average total cost can also be obtained by adding average fixed and average variable costs:

Rice. 5.

Graphically, average costs are depicted by summing the curves of average fixed and average variable costs and have a Y-shape (Fig. 6).

Rice. 6.

The role of average costs in the activities of the company is determined by the fact that their comparison with the price allows you to determine the amount of profit, which is calculated as the difference between total revenue and total costs. This difference serves as a criterion for choosing the right strategy and tactics for the firm.

The concepts of total and average costs are not enough to analyze the behavior of the firm. Therefore, economists use another type of cost - marginal.

marginal cost - is the increase in the total cost of producing an additional unit of output.

The category of marginal cost is of strategic importance, since it allows you to show the costs that a firm will have to incur if it produces one more unit of output or save if it reduces production by that unit. In other words, marginal cost is the amount that the firm can directly control.

Marginal cost is obtained as the difference between the production costs n+ 1 units and production costs P product units.

Since when the volume of output changes, the fixed costs FV do not change, the change in marginal cost is determined only by the change in variable costs as a result of the production of an additional unit of output.

Graphically, marginal costs are depicted as follows (Fig. 7).

Rice. 7. Marginal and average costs Chuev I.N., Chechevitsyna L.N. Enterprise economy. - M.: ITK Dashkov i K - 2006. - 228s.

Let us comment on the main relationships between average and marginal costs.

The size of marginal and average costs are extremely important, since they primarily determine the choice of the volume of production by the firm.

MS do not depend on FС , because fc do not depend on the volume of production, and MC are incremental costs.

As long as MC is less than AC, the average cost curve has a negative slope. This means that the production of an additional unit of output reduces the average cost.

When MC equals AC, this means that average costs have stopped decreasing, but have not yet begun to increase. This is the point of minimum average cost (AC = min).

5. When MC becomes larger than AC, the average cost curve goes up, indicating an increase in average cost as a result of the production of an additional unit of output.

6. The MC curve intersects the AVC curve and the AC curve at the points of their minimum values ​​(Fig. 7).

Under average refers to the costs of the plant for the production and sale of a unit of goods. Allocate:

* average fixed costs A.F.C., which are calculated by dividing the firm's fixed costs by the volume of production;

* average variable costs AVC, calculated by dividing the variable costs by the volume of production;

* average gross costs or the total cost of a unit of ATS product, which are defined as the sum of average variable and average fixed costs or as a quotient of dividing gross costs by the volume of output (their graphical expression in Appendix 3).

* according to the methods of accounting and grouping costs, they are divided into simple(raw materials, materials, wages, depreciation, energy, etc.) and complex, those. collected in groups either by functional role in the production process or by the place of costs (shop expenses, general factory expenses, etc.);

* according to the terms of use in production, everyday, or current, costs and lump sum, one-time costs incurred less than once a month and marginal cost is used for economic cost analysis.

Average total cost (ATC) is the total cost per unit of output that is commonly used to compare against price. They are defined as the quotient of total costs divided by the number of units of output produced:

TC = ATC / Q (2)

(AVC) is an indicator of the cost of a variable factor per unit of output. They are defined as the quotient of gross variable costs divided by the number of units of production and are calculated using the formula:

AVC = VC / Q. (3)

Average fixed costs (AFC) - an indicator of fixed costs per unit of output. They are calculated according to the formula:

AFC=FC/Q. (four)

Graphical dependences of the values ​​of various types of average costs on the volume of output are presented in fig. 2.

Rice. 2

From the data analysis in fig. 2 can be concluded:

1) the value of AFC, which is the ratio of the constant FC to the variable Q (4), is a hyperbola on the graph, i.e. with an increase in production volume, the share of average fixed costs per unit of output decreases;

2) the value of AVC is the ratio of two variables: VC and Q (3). However, variable costs (VC) are almost directly proportional to output (since the more products are planned to be produced, the higher the costs will be). Therefore, the dependence of AVC on Q (volume of production) has the form of an almost straight line parallel to the x-axis;

3) ATC, which is the sum of AFC + AVC, on the graph has the form of a hyperbolic curve, located almost parallel to the AFC line. Thus, as in the case of AFC, the share of average total costs (ATC) per unit of output decreases with increasing output.

Average total costs first fall and then start to rise. Moreover, the ATC and AVC curves are approaching. This is because average fixed costs in the short run decrease as output increases. Therefore, the difference in the height of the ATC and AVC curves at a given volume of production depends on the value of AFC.

In the specific practice of applying cost calculation to analyze the activities of enterprises in Russia and in Western countries, there are both similarities and differences. The category is widely used in Russia cost price, which is the total cost of production and sale of products. Theoretically, the cost price should include standard production costs, but in practice it includes excess consumption of raw materials, materials, etc. The cost is determined on the basis of adding up economic elements (homogeneous in terms of economic purpose of costs) or by summing up costing items that characterize the direct directions of certain costs.

Both in the CIS and in Western countries, to calculate the cost, a classification of direct and indirect costs (expenses) is used. Direct costs are the costs directly associated with the creation of a unit of goods. Indirect costs are necessary for the general implementation of the production process of this type of product at the enterprise. The general approach does not exclude differences in the specific classification of some articles.

In connection with the volume of output, costs in the short run are divided into fixed and variable.

The constants do not depend on the volume of output (FC). These include: depreciation costs, wages for employees (as opposed to workers), advertising, rent, electricity bills, etc.

The variables depend on the volume of output (VC). For example, the cost of materials, the wages of the main production workers and others.

Fixed costs (costs) are also present at zero output (therefore, they are never equal to zero). For example, regardless of whether the product is produced or not. You still need to pay rent for the space. On the graph of the dependence of the value of costs (C) on the volume of production (Q), fixed costs (FC) look like a horizontal straight line, since they are not related to the output (Fig. 1).

Since variable costs (VC) depend on output, the more products are planned to be produced, the more costs need to be incurred for this. If nothing is produced, then there are no costs. Thus, the value of variable costs is in direct positive dependence on the volume of output and on the graph (see Fig. 1) is a curve emerging from the origin.

The sum of fixed and variable costs is equal to the total (gross) costs:

TC=FC+VC.(1)

Based on the above formula, on the graph the curve of total costs (TC) is built parallel to the curve of variable costs, however, it does not start from zero, but from a point on the y-axis. corresponding to the fixed costs. It can also be concluded that with an increase in the volume of production, the total costs grow proportionally (Fig. 1).

All considered types of costs (FC, VC and TC) refer to the entire output.

Rice. one Dependence of total costs (TC) on variables (VC) and constants (FC).

The costs of the enterprise can be considered in the analysis from different points of view. Their classification is based on various features. From the standpoint of the impact of product turnover on costs, they can be dependent or independent of the increase in sales. Variable costs, an example of the definition of which requires careful consideration, allow the head of the company to manage them by increasing or decreasing the sale of finished products. Therefore, they are so important for understanding the correct organization of the activities of any enterprise.

general characteristics

Variables (Variable Cost, VC) are those costs of the organization that change with an increase or decrease in the growth of sales of manufactured products.

For example, when a company goes out of business, variable costs should be zero. To operate effectively, a business will need to evaluate its cost performance on a regular basis. After all, they affect the size of the cost of finished products and turnover.

Such items.

  • The book value of raw materials, energy resources, materials that are directly involved in the production of finished products.
  • The cost of manufactured products.
  • The salary of employees, depending on the implementation of the plan.
  • Percentage of the activities of sales managers.
  • Taxes: VAT, STS, UST.

Understanding Variable Costs

In order to properly understand such a concept, how their definitions should be considered in more detail. Thus, production in the process of carrying out its production programs spends a certain amount of materials from which the final product will be made.

These costs can be classified as variable direct costs. But some of them should be shared. A factor such as electricity can also be attributed to fixed costs. If the cost of lighting the territory is taken into account, then they should be attributed to this category. Electricity, directly involved in the process of manufacturing products, refers to variable costs in the short term.

There are also costs that depend on turnover but are not directly proportional to the production process. Such a trend may be caused by insufficient workload (or excess) of production, a discrepancy between its design capacity.

Therefore, in order to measure the effectiveness of an enterprise in managing its costs, one should consider variable costs as obeying a linear schedule over a segment of normal production capacity.

Classification

There are several types of variable cost classifications. With a change in costs from implementation, a distinction is made between:

  • proportional costs, which increase in exactly the same way as the volume of production;
  • progressive costs that increase at a faster rate than implementation;
  • degressive costs, which increase at a slower rate as the rate of production increases.

According to statistics, the company's variable costs can be:

  • general (Total Variable Cost, TVC), which are calculated for the entire product range;
  • averages (AVC, Average Variable Cost), calculated per unit of goods.

According to the method of accounting in the cost of finished products, variables are distinguished (they are simply attributed to the cost) and indirect (it is difficult to measure their contribution to the cost).

With regard to the technological output of products, they can be industrial (fuel, raw materials, energy, etc.) and non-productive (transportation, interest to an intermediary, etc.).

General variable costs

The output function is similar to variable costs. She is continuous. When all costs are brought together for analysis, the total variable costs for all products of one enterprise are obtained.

When common variables are combined and their total sum in the enterprise is obtained. This calculation is carried out in order to reveal the dependence of variable costs on the volume of production. Further, the formula is used to find variable marginal costs:

MS = ∆VC/∆Q where:

  • MC - marginal variable costs;
  • ΔVC - increase in variable costs;
  • ΔQ - increase in output.

Average cost calculation

Average variable cost (AVC) is the amount of resources a company spends per unit of output. Within a certain range, production growth has no effect on them. But when the design capacity is reached, they begin to increase. This behavior of the factor is explained by the heterogeneity of costs and their increase with large scale production.

The presented indicator is calculated as follows:

AVC=VC/Q where:

  • VC - the number of variable costs;
  • Q - the number of products released.

In terms of measurement parameters, average variable costs in the short run are similar to changes in average total costs. The greater the output of finished products, the more total costs begin to match the growth of variable costs.

Variable cost calculation

Based on the above, the variable cost (VC) formula can be defined as:

  • VC = Cost of materials + Raw materials + Fuel + Electricity + Bonus salary + Percentage of sales to agents.
  • VC = Gross Profit - Fixed Costs.

The sum of variable and fixed costs is equal to the total cost of the organization.

Variable costs, an example of the calculation of which was presented above, are involved in the formation of their overall indicator:

Total Costs = Variable Costs + Fixed Costs.

Definition example

To better understand the principle of calculating variable costs, consider an example from the calculations. For example, a company characterizes its output as follows:

  • The cost of materials and raw materials.
  • Energy costs for production.
  • Wages of workers producing products.

It is argued that variable costs grow in direct proportion with the increase in sales of finished products. This fact is taken into account to determine the break-even point.

For example, it was calculated that it amounted to 30 thousand units of production. If you build a graph, then the level of break-even production will be equal to zero. If the volume is reduced, the company's activities will move into the plane of unprofitability. And similarly, with an increase in production volumes, the organization will be able to receive a positive net profit result.

How to reduce variable costs

The strategy of using the "scale effect", which manifests itself with an increase in production volumes, can increase the efficiency of the enterprise.

The reasons for its appearance are as follows.

  1. Using the achievements of science and technology, conducting research, which increases the manufacturability of production.
  2. Reducing the cost of salaries of managers.
  3. Narrow specialization of production, which allows you to perform each stage of production tasks with higher quality. This reduces the marriage rate.
  4. Implementation of technologically similar production lines, which will provide additional capacity utilization.

At the same time, variable costs are observed below sales growth. This will increase the efficiency of the company.

By familiarizing themselves with the concept of variable costs, the calculation example of which was given in this article, financial analysts and managers can develop a number of ways to reduce the total cost of production and reduce the cost of production. This will make it possible to effectively manage the pace of turnover of the company's products.

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