Advice 1: How to calculate variable costs

Variables costs are defined as costs the amount of which varies depending on production volume. Variable costs include costs for raw materials, materials and components, wages of production personnel, travel expenses, awards, costs for fuel, water and electricity. The purpose of variable cost savings. The sum of the variable costs, which falls per unit of the product is almost constant at different volumes of production.
How to calculate variable costs
You will need
  • - Data on volume of output in natural units
  • - Accounting data about the costs of materials and components, tooling wages, fuel and energy resources for the period.
Based on the documents on the write-off of raw materials, acts of performance of work or services performed by auxiliary units or outside organizations, determine the amount of material expenses for production of products or services over the period. Of material costs exclude the amount of the return of waste.
Determine the amount of labor costs, which consists of piecework and hourly wage of production workers and service staff, bonuses, allowances and bonuses, contributions to social insurance funds.
Determine the cost of electricity, water and fuel used for technological needs, on the basis of actual consumption and purchase price.
Determine the amount of transportation and procurement costs and costs for packaging.
Add all the above amounts, you determine the total variable costs for all manufactured products for the period. Knowing the amount of manufactured products by dividing the sum of variable costs per unit of output. The critical level of variable costs per unit of product calculate according to the formula C–PZ/V, where C – the price of the product, PZ – fixed costs, V is the volume of output in natural units.
In terms of taxes, fees and other obligatory payments, the amount of which depends on the volume of production, reducing variable costs is only possible with changes in legislation.
Useful advice
The decrease in variable costs will cause the growth of labor productivity, reducing the number of employees the main and auxiliary production, a decrease in the supply of raw materials and finished products, economical use of materials, use of energy saving technological processes, implementation of advanced control schemes.

Advice 2 : How to determine variable costs

In the course of business CEOs spend cash on certain needs. All these costs can be divided into two groups: variables and constants. The first group includes those costs that depend on the volume produced or sold products, the second is not changed depending on the production volume.
How to determine variable costs
To determine the variables cost, view on their purpose. For example, you purchased any material that goes into production, that is, he directly participated in the release. Let it be wood, which produce lumber of various sections. From the amount of purchased wood will depend on the volume of produced lumber. Such costs relate to variables.
In addition to the wood you use electricity, the amount of which also depends on production volume (the more you produce products, the more you spend kilowatts), for example, when working with the sawmill. All of the expensesthat you will pay the company supplying electricity, also relate to variable costs.
To produce products that you use labor, which must pay wages. These costs relate to variables.
If you do not have own production, and act as an intermediary, that is, resell previously purchased goods, the total purchase price related to variable costs.
To determine the variables costs, analyze the dynamics of increase in all costs. As a rule, they will increase when the volume of production will rise, and conversely, decrease when decrease in performance.
To understand what it means to variables costs, consider permanent. For example, the rent of the premises does not affect the volume of production. These expenses and are permanent. Salary management staff is also not always depend on the output, then as an employee of the shop gets is proportional to the volume of products manufactured.
In variables expenses include deductions for social needs of the employees production; fuel, water. All of that affects the volume.
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