Instruction

1

To find the consumption, divide the cost of the material costs cost of manufactured products. This indicator allows you to determine the costs of raw materials and other material resources per unit of finished products. The reduction of the material indicates an increase in production efficiency since the same amount of material resources it is possible to obtain a greater volume of finished products, and thus to reduce costs and create additional profit.

2

Note that there are absolute, structural and specific consumption of materials. Absolute material consumption shows the consumption rate for a product, the net weight of the product and extent of use of materials:

KISP = ΣMчист/ΣNр where

Mcast – net weight of each product;

NP – the rate of materials on each product.

The total rate of consumption of materials for each product is defined as a set of norms of expenses of each kind of materials. For example, in the manufacture of bread, the total flow rate will be as follows: ΣNр = Nрм + Nрд + Nрв + Nрс where

Nрм – flow rate of the flour, yeast, water, salt.

KISP = ΣMчист/ΣNр where

Mcast – net weight of each product;

NP – the rate of materials on each product.

The total rate of consumption of materials for each product is defined as a set of norms of expenses of each kind of materials. For example, in the manufacture of bread, the total flow rate will be as follows: ΣNр = Nрм + Nрд + Nрв + Nрс where

Nрм – flow rate of the flour, yeast, water, salt.

3

Structural material shows the specific weight of individual groups of materials in the total material products. For its calculation, use the formula:

i = R/Σμi where

R – the number of types of materials;

µi is the share of each material in the total material.

i = R/Σμi where

R – the number of types of materials;

µi is the share of each material in the total material.

4

Specific consumption of materials is a structural material, given to the natural unit of measure of the product of a certain type (meters, square meters, cubic meters, liters, etc.). Remember that the system of indicators of material consumption is closely related to system flow rate of the materials, as the main source of analysis of the material together with actual data about the use of material resources during the period under review are the material consumption norms. Calculation and analysis of the material allows to make a conclusion about the rational use of raw materials and their economy.

# Advice 2: How to calculate performance indicators

The efficiency of the company is among the most important economic criteria. In the most General form it can be represented as a ratio of expenses necessary for production and the result obtained in the course of its implementation.

Instruction

1

The most common indicator

**of the efficiency**of production is the labor productivity which is defined as the ratio of total revenue to number of workers employed in manufacturing. The growth of labor productivity with the same number of employees indicates increasing**the efficiency**of use of labour resources. The reciprocal of this indicator is the complexity. It shows how much human labor is used for production of a particular product.2

Another indicator

**of the effectiveness**of production – consumption. It is calculated as the ratio of production costs (raw materials, materials, fuel, etc.) to value added products. This ratio shows how many material resources it took to produce one monetary unit of earnings. Indicator, reverse this – materialattach reflects the volume of production per rouble of material costs.3

Similarly is calculated as the coefficient

**of efficiency**of production – capital ratio and a reverse – return on assets. Unlike the previous indicator, it reflects the efficiency of fixed assets.4

Capital intensity is calculated as the ratio invested in the production of capital to the value of the output. It shows the costs of the investment necessary to produce one unit of output.

5

In addition to indicators

**of the efficiency of**production are the profitability ratios. The total ROI is calculated as the ratio of profit of enterprise to the cost of fixed and current assets. Profit margin is determined by dividing the profit for the cost of goods manufactured, and return on equity on the equity value of the firm.