Analysis of the cost of production

Questions: Meaning, tasks and resources analysis of production costs. Analysis of the cost of production and sales on economic elements. Cost analysis KZT1 output. Analysis of the cost of certain types of products. Analysis of direct material and labor costs. Analysis of indirect costs.


Meaning, tasks and resources analysis of production costs


The most important indicator of economic efficiency of production, which reflects all aspects of economic activity and the accumulation of all the results of the use of productive resources is the cost of production. Depend on its level financial performance, the rate of expanded reproduction, the financial condition of business entities. Analysis of the cost of goods (works, services) reveals trends in this indicator, the implementation plan for its level, the impact of factors on the level, untapped reserves, and also allows to assess the performance of the enterprise for use of the opportunities to reduce production costs.

Tasks cost analysis of products (works, services):

- Assess the dynamics of the cost of production as a whole and by cost components;

- Assess the dynamics of the cost level at 1 tenge of output;

- Assess the dynamics of the cost of individual products;

- Examine individual cost items;

- To determine the influence of factors;

- Identify the reserves to reduce the cost of goods (works, services);

- Develop measures to reduce production costs.

Sources of information for analysis are statistical reports on the costs of production and sale of goods (works, services), planning and reporting product costing, data of synthetic and analytical cost accounting for primary and secondary production.


Analysis of the cost of production and sales on economic elements


Analysis of the cost of production usually begins with a study of the cost of production as a whole and by major cost elements. The total cost of production may change under the influence of: production volume, product mix, the level of variable costs per unit of output, the amount of fixed costs.

If you change the volume of production increases only variable costs (piecework wages of production workers, direct material costs, services), fixed costs (depreciation, rent, time-based wages of workers and administrative staff) remain unchanged in the short term (while maintaining former production facility). The cost of production depends on the resource intensity of production (labor intensity, material consumption, capital intensity and energy intensity) and changes in prices for the resource consumption due to inflation. For a more complete explanation of the reserves necessary to consider the influence of external inflationary factors. During the analysis it is necessary to evaluate the changes in the structure of cost components. The decrease in the share of wages and increase of depreciation show an improvement in the technical level of the enterprise, the growth of labor productivity. The share of wages is reduced and if the share of component parts, which indicates an increased level of cooperation and specialization of enterprises.


Analysis of the cost of goods manufactured of KZT 1


Summarizing the most important measure of the level of production costs for the whole enterprise - the cost of 1 tenge output. He is a universal indicator, as it can be calculated in any branch of production and demonstrates a direct relationship between the cost and profit. This figure is calculated on total costs of production and sales to the value of output in current prices. If it is below the level of the unit, the production is cost-effective, and at a level above the unit - unprofitable. In the process of analysis is necessary to study the dynamics of the cost of 1 tenge products. At the level of this index is influenced by: change in total output, changes in the structure of production, changes in product prices. Its level is also affected by changes in the level of unit variable costs and the effect of the fixed costs, which in turn depend on changes in resource intensity of products and price changes in the consumption of resources. Also a change in the level of prices for the products affected by: the change in prices due to inflation, changes in product quality, changing markets for products.


Cost analysis of selected products


For a better understanding of the causes of changes in the cost calculation analyze accounting for individual products, compare the actual level of unit costs with planned and previous years data in general and cost items. After that, more detailed study of the cost of production for each item of expenditure for which actual data are compared with the planned or data for previous periods. Identified deviations cost items are subject to factor analysis. As a result, the line-item analysis of the cost of production should be identified internal and external, objective and subjective factors change its level. These calculations are needed to control the process of formation of qualified costs and finding ways to reduce them.


Analysis of direct material and labor costs


At the cost of production occupy a large proportion of material costs. The total amount of material costs for the whole company depends on the volume of production, its structure and changes in the specific material costs for certain types of products. The level of material costs per unit of output depends on the flow of raw materials per unit of output and the average unit cost of raw materials.

Direct labor costs have a major impact on the formation of the cost of production. The total amount of direct wages depends on the volume of production, its structure and the level of costs for certain products. Wages per unit of production influence the complexity of individual products and the level of wages for 1 man-hour. Labor intensity of production and the level of remuneration depends on the introduction of new, advanced equipment and technology, mechanization and automation of production, labor, training of employees and other innovative activities.


Analysis of indirect costs


The structure of indirect costs included comprehensive article: cost of maintaining and operating the equipment, overhead and general expenses, and business expenses. The analysis is performed by comparing the actual values with their planned level and with the data for previous periods. Next, find out the reasons for their change. Complete article consists of several cost elements.

The costs of maintenance and operation of machinery and equipment includes depreciation of machinery and technological equipment, the cost of repair, maintenance, and costs internal movement of goods.

The total amount of depreciation depends on the number of machines and equipment, their structure, cost and depreciation rates. The cost of equipment may change due to the acquisition of more expensive machines and their revaluation due to inflation.

By the amount of operating costs affect the number of existing equipment, while it is running, and the unit cost per machine-hour.

The cost of repair can vary due to the volume of repair works, their complexity, the degree of depreciation of fixed assets, the cost of spare parts and repair materials.

The amount of expenditure on in-plant movement of goods is influenced by type of vehicle, the fullness of their use, the extent of the production program, the economical use of funds for maintenance and operation of rolling stock.

For the analysis of overhead and general running costs of cost items using data analytical accounting. For each article reveals the absolute and relative deviations from the plan and their causes.

         A change in the wage management of employees affected by the change in the number of employees and average wages (change of salary, bonus payments, bonuses).


Questions for self-control

1 .Name the main tasks of analysis of production costs.

2. What are the main sources of the analysis of the cost of production.

3.  As the analysis of production costs for items costing?

4. What is the essence of cost analysis on economic elements?

5. How is the analysis of indirect costs?