The calculation of production costs in production is determined for various purposes, one of which is pricing. This value is very important for the enterprise, because accurately shows the total amount of money spent on the production of a product. In the future, it is used to set the most effective price for selling products. Thus, analysis of the cost indicator will not allow the organization to become unprofitable and uncompetitive due to high pricing policies. How to correctly determine the cost of a product (service) and what cost items should be included in the calculations so that the result is truthful?
Essence and types of cost
To manufacture one unit of a product, an enterprise spends a certain amount of money on the purchase of materials (raw materials), energy, machines, fuel, employees, taxes, sales, etc. All these expenses ultimately give a total indicator of the funds spent, which is called the cost of 1 piece of product.
Each enterprise in practice calculates this value for planning production and accounting for the finished commodity mass two ways:
- by economic elements of costs (cost of all products);
- calculate costing items per unit of product.
All funds that were spent on the manufacture of products before the finished products were delivered to the warehouse ultimately show the net factory cost. But they still need to be implemented, which also requires costs. Therefore, to obtain full cost you still need to add sales costs to them. This could be, for example, transportation costs, wages for loaders or cranes who participated in the shipment and delivery of products to the customer.
Calculation methods product costs allow you to see what money is spent directly in the workshop and then at the exit of the product from the plant as a whole for delivery to the customer. Cost indicators are important for accounting and analysis at each stage.
Based on these requirements and ideas, there are such types of cost:
- workshop;
- production;
- full;
- individual;
- industry average.
Each calculation allows you to analyze all stages of production. Thus, it is possible to determine where costs can be reduced, avoiding unnecessary overspending on the production of commercial products.
When determining the cost units of goods costs are grouped into a general calculation of items. Indicators for each position are tabulated for individual types of expenses and summarized.
Structure of this indicator
Industry productions differ in their specificity of products (provision of services), which influence the cost structure. Different areas are characterized by their own special costs for basic production, which prevail over others. Therefore, they are primarily paid attention to when trying to reduce costs in order to increase.
Each indicator that is included in the calculations has its own percentage share. All expenses are grouped by item into a general cost structure. Cost items show a percentage of the total. This clarifies which ones are priority or additional production costs.
Per share cost indicator influenced by a variety of factors:
- location of production;
- application of achievements of the scientific and technological process;
- inflation;
- concentration of production;
- change in the interest rate of a bank loan, etc.
Therefore, there is no constant cost price even for manufacturers of identical products. And you need to monitor it very scrupulously, otherwise you can bankrupt the enterprise. Assessing the production costs indicated in the costing items will allow you to timely reduce the costs of producing marketable products and make a greater profit.
In the calculations of enterprises, the calculation method of estimating the cost of products, semi-finished products, and services prevails. Calculations are carried out per unit of commodity mass, which is manufactured at an industrial facility. For example, 1 kW/h of electricity supply, 1 ton of rolled metal, 1 t-km of cargo transportation, etc. The calculation unit must necessarily comply with standard standards of measurement in physical terms.
If you have not yet registered an organization, then easiest way This can be done using online services that will help you generate all the necessary documents for free: If you already have an organization and you are thinking about how to simplify and automate accounting and reporting, then the following online services will come to the rescue and will completely replace an accountant at your enterprise and will save a lot of money and time. All reporting is generated automatically, signed electronically and sent automatically online. It is ideal for individual entrepreneurs or LLCs on the simplified tax system, UTII, PSN, TS, OSNO.
Everything happens in a few clicks, without queues and stress. Try it and you will be surprised how easy it has become!
Classification of expenses
Production of products involves the use of raw materials, technical devices, the involvement of service personnel directly involved in production activities and additional materials, mechanisms and persons serving and managing the enterprise. Based on this, cost items are used differently in costing. Only direct costs can be included, for example, when calculating shop costs.
First, for convenience, expenses are classified according to similar criteria and combined into groups. This grouping allows you to accurately calculate the indicator of production costs related to one economic component of the cost.
That's why expenses are pooled into separate classes based on the following similar properties:
- according to the principles of economic homogeneity;
- type of products;
- methods of adding individual goods to the cost price;
- depending on the place of origin;
- intended purposes;
- quantitative component in production volumes;
- etc.
Cost items are classified according to general characteristics to identify a specific object or location of costs.
Classification is made according to economic criteria of homogeneity for calculating costs per unit of manufactured products:
This list of economic elements is the same for calculating costs in all industries, which allows for comparison of the structure of costs for the manufacture of goods.
Example of calculations
To determine the funds spent on manufacturing products, you need to use one of two methods:
- based on cost calculation;
- using production cost estimates.
Usually calculations are carried out for a quarter, half a year, or a year.
Calculation of the cost of manufactured products for any period can be performed according to these instructions:
Calculation example cost of plastic pipes at the manufacturing plant for 1000 m of products and determine the selling price for 1 m of goods:
- We determine how much money was spent according to paragraphs 4, 5 and 6 of the source data:
- 2000x40/100= 800 rubles – transferred to funds based on wages;
- 2000x10/100 = 200 rubles - general production expenses;
- 2000x20/100 = 400 rubles - general business expenses;
- The production cost for the manufacture of 1000 m of pipe consists of the sum of the cost indicators in paragraphs 1-6:
3000+1500+2000+800+200+400= 7900 rub. - Cost indicators for product sales
7900x5/100 = 395 rub. - So, the total cost of 1000 m of plastic pipes will be equal to the sum of production costs and sales costs
7900 + 395 = 8295 RUR
According to the amount received, the total cost of 1 m of plastic pipe will be equal to 8 rubles. 30 kopecks - The selling price of pipe per 1 m, taking into account the profitability of the enterprise, will be:
8.3+ (8.3x15/100) = 9.5 rub. - The company's markup (profit from the sale of 1 m of pipe) is:
8.3x15/100 = 1.2 rub.
Formula and procedure for calculations
Calculation of total cost(PST) should be determined using the following formula:
PST = MO+MV+PF+TR+A+E+ZO+ZD+OSS+CR+ZR+NR+RS,
Expense items are determined separately for each type of product and then summed up. The resulting amount will show the costs incurred by production in the manufacture and sale of a certain product from the finished goods warehouse. This indicator will be the total cost per unit of production, to which profit is then added and the selling price of the product is obtained.
Balance calculation procedure
It is important for an enterprise to obtain an indicator cost of goods sold to identify the profitability of manufactured products. You can understand how much profit was received from each ruble invested in production using the formula for calculating the balance of the cost of goods sold.
Eat two types of calculations, which use:
- Profit from the sale of sold products;
To calculate the profitability indicator, two cost parameters are also used: direct and general production (indirect). Direct costs include costs for materials, equipment and wages of workers that are directly related to the manufacture of products. Indirect costs are money spent on equipment repairs, fuels and lubricants, salaries of management personnel, etc., but not directly involved in the creation of goods. To analyze net income from the sale of manufactured products, you do not need to take into account indirect costs.
In commercial enterprises it is carried out two main calculation options budget for direct costs of raw materials:
- normative;
- analytical.
Where cost estimates for the manufacture of products are prepared using the standard method, the cost indicator is calculated more accurately, but takes longer. For large volumes of products it is more acceptable than for companies with small production. The analytical method allows you to determine the cost of production much faster, but the error will be greater. In small enterprises it is used more often. Regardless of how the direct costs of production are calculated, they will be needed further to determine the amount of net profit.
So, when calculating the base, direct costs are taken and additional ones are not included, which makes it possible to more accurately assess the profitability of the manufactured product separately. You will receive the total direct costs of manufacturing products for a certain period. From this amount you need to subtract the amount of unfinished semi-finished products. Thus, an indicator will be obtained that reflects how much money was invested in the manufacture of products during the billing period. This will be the cost of products manufactured and delivered to the warehouse.
To determine the cost of goods sold, you need to know the balances of finished products in the warehouse at the beginning and end of the month. The cost of an individual product is often calculated to determine how profitable it is to produce.
Cost calculation formula products sold from warehouse per month as follows:
PSA = OGPf at the beginning of the month + GGPf – OGPf at the end of the month,
- OGPf at the beginning of the month - the balance of finished products in the warehouse at the beginning of the reporting month;
- PGPf – products produced per month at actual cost;
- OGPf at the end of the month – balance at the end of the month.
The resulting cost of goods sold is used in calculations to determine profitability. To do this, it is determined as a percentage: profit is divided by the cost of goods sold and multiplied by 100. Profitability indicators are compared for each item of the manufactured product and analyzed what is profitable to manufacture further in production, and what needs to be excluded from production.
The definition of the concept of product cost and methods for calculating it are discussed in the following video:
In the case of economic activities of enterprises, the calculation of product costs becomes a significant factor. There is a direct dependence of this indicator on the volume of products produced and their quality. In addition, other factors are also important:
- Time spent by employees at work.
- Quantity and quality of materials used.
- Use of equipment.
- Raw materials.
Cost indicator– basic when it comes to determining the price for a particular product. Therefore, let’s talk in more detail about how to calculate it, how product costs are calculated.
What is included in the cost
Cost: basic concept
When working with cost, they rely on the current costs of the enterprise that arose due to the organization of production processes and the sale of products.
There are two types of cost for companies:
- According to the plans.
- In fact.
The cost of the planned type depends on the level of production cost that is expected. Measurements are carried out over certain time intervals. In this case, the following indicators are assumed to be used:
- Consumption standards for materials.
- Raw materials.
- Labor costs.
- Equipment.
Actual cost is an indicator related to current production indicators. Separately determine the level of costs required to create a unit of production. An Excel sample with calculations can be downloaded from us.
Costing is used to calculate exact numbers. In this case, special articles are used that determine the type of costs. The types of such articles also depend on several factors:
- Manufactured products along with their characteristic features.
- Production processes, their specifics.
- The sector of the economy for which the enterprise operates. The example is easy to download on our website.
About the types
In relation to production practice, the concepts of full cost, as well as its production variety, have become widely used. The last group involves the use of such expense items as:
- General expenses for production and housekeeping.
- Remuneration for workers for their work. This includes standard wages.
- Purchase of fuel, raw materials and similar consumables.
- Use of certain materials.
When it comes to the full cost, costs associated not only with the production itself are taken into account, but also, for example, commercial ones. We are talking about the process of selling products, advertising, storage, creating suitable packaging, paying salespeople, and similar things. An example calculation in Excel will help you figure it out.
Depending on the volume of goods produced, the costs that determine the cost may change. Therefore, the costs themselves can be constant or variable. General production and general economic in this case represent a conditionally permanent variety. But technological costs and labor costs cannot be considered as such. After all, this characteristic can increase, depending on the results of the enterprise.
Cost of various products
On the role of calculations in enterprise management
Accounting for production costs is a prerequisite for organizing the costing itself. It is assumed that all operations in the enterprise must have documentary evidence. It is important to analyze and summarize information based on various characteristics. Only a detailed analysis of production allows us to further organize costing with accurate results.
There is a close relationship between production accounting and costing. For example, information collected during production accounting becomes the basis that helps calculate the cost of one unit of goods. Accuracy has varying degrees, depending on the goals of the enterprise in terms of costing.
The costing processes themselves have three stages:
- The first is to calculate the cost of products produced in general.
- The next stage is calculating indicators for individual types of goods.
- Finally, the latter includes indicators of one unit of a good, service or work.
The costing process is often highly complex. First come the primary costs, and then move on to auxiliary indicators. It is important to take into account the so-called mutual favors, which further complicates the process.
When it is necessary to manage production, calculation becomes necessary, even only based on objective factors.
Valuation of finished goods inventory has previously been the main goal for creating such systems.
What to consider when working
More balanced solutions are now being used. The information used makes it possible not only to solve traditional problems, but also to predict economic consequences. For example, when you need to analyze the following indicators:
- At what quality level is the staff working?
- Is it worth upgrading your current equipment?
- The need to optimize the range of products.
- What price would be optimal?
- Should I continue producing products or do something else?
Thanks to such procedures, it becomes easier for the enterprise to evaluate the adopted plans. In addition, the data is used for further activity planning.
About the principles and objects of calculation
The following principles become the main ones for calculation, regardless of the characteristics of a particular enterprise:
- Scientific justification for any costs. In some industries this is important for developing appropriate guidelines.
- Accurate identification of objects and units of measurement. In many cases, accounting objects for different areas of activity do not coincide with each other.
The choice of a specific unit of measurement depends on the characteristics of production.
In addition, it is important to choose a specific method for allocating indirect costs. Otherwise, the unit cost of production cannot be determined correctly. The company chooses the appropriate method independently. The research results are recorded in the accounting policy. The main thing is not to change them for at least one financial year.
Costs must be clearly delineated by period. The main principle is the so-called accrual principle. After all, transactions are often processed at the time of transfer, and may not be linked to cash flows. That’s why you have to understand what accurate calculation is.
Costing methods
About methods in calculation
It is important to understand which method is used to reflect and document all production costs. There are various options for action that can be taken in this direction.
Pro-process
The most relevant solution for the extractive industries. Energy companies also often use this method. It is also suitable for processing industries, which are characterized by the use of simple technologies.
The method is suitable for enterprises with the following characteristics:
- In the production of mass-produced products.
- There are restrictions on the nomenclature.
- Measurement and calculation are carried out with a standard unit of measurement.
- Complete absence of unfinished processes in production, or a minimum number of them.
For products, the cost price is calculated in three stages:
- Determination of cost for all goods produced by production. Then we divide the costs by the number of products. We get the result associated specifically with the unit of production.
- We divide the amounts of commercial and management activities by the volume of products created over a certain time period.
- All that remains is to add up the numbers obtained in the two previous stages.
Transverse method
An excellent method for mass or industrial production. Production has several stages through which products pass. The relevance of the method increases in enterprises where various types of chemical processing are used. Each completed process leads to the creation of objects in the form of products, when the cost of production is calculated.
The essence of the cross-type method is described as follows. Current accounting is used to reflect direct costs, but is broken down based on redistributions rather than types of goods. The situation when different goods are received during the same redistribution is no exception. Redistributions become objects for carrying out operations.
Processing is part of production technologies when a semi-finished product is obtained in finished form. It can be sold externally or processed further. Passing through all stages of processing allows us to obtain finished products. A current option for industrial complexes.
Table in Excel
Custom
The method works best for unique items, each of which is made to order. A single type of production is the main characteristic of enterprises for which the custom method of costing will be relevant. This has implications for those wondering how to do the calculations.
The following characteristics distinguish unit type production:
- Wide range of manufactured goods. Repetitions are largely absent. Individual products are created when certain orders are placed.
- Each workplace has its own specialization in terms of technology. It is impossible to assign work processes and details to a specific place on an ongoing basis.
- Use of tools with multipurpose equipment.
- The presence of a serious share in manual assembly and finishing operations.
- A staff consisting of a large number of generalists whose qualifications are at a high level.
And in this method, individual costing items are highlighted, which allow you to achieve the most accurate result.
The results of any calculation need to be adjusted from time to time, because their accuracy is almost always questioned.
Often, clients, when buying installations, ask: “How much will the manufactured package cost?” At the same time, in most cases, the essence of the issue is solely the cost of the material used for packaging. The remaining cost components are omitted, assuming that the material is key in its structure.
In our opinion, it is not entirely correct to reduce the cost only to the cost of the material used. Indeed, depending on the situation, the material can play either a key or a secondary role. Therefore, we will describe the cost calculation in full, and the client is free to choose which part of this calculation should be used in his particular case.
Cost of packaging
The cost of packaging refers to all costs associated with the creation (manufacturing) of a unit of packaging and expressed in monetary terms. The cost can be calculated using the formula:
Seb = StMat + StIzg, Where
- Seb- cost of packaging.
- StMat- the cost of the material spent on the manufacture of packaging.
- StIzg- the cost of manufacturing the packaging itself.
Cost of packaging production
The cost of manufacturing includes all costs of producing packaging, with the exception of the cost of material, including the cost of packaging equipment on which the packaging is manufactured, the cost of electricity consumption by such equipment, associated costs and labor costs for the equipment operator. If we reduce this to a formula, it will look like this:
StIzg = StOb/ResOb + (StEl + NW + ZOT)/Coop, Where
- Stob- cost of equipment, including commissioning costs.
- ResOb- equipment resource in the number of packages.
- StEl- the cost of electricity consumed by the equipment.
- NW- associated costs, such as renting premises for equipment, etc. In principle, if the share of associated costs is small, or the equipment is used in a general workshop, where it is impossible to calculate the share of costs for specific equipment, this component can be neglected.
- ZOT- the cost of paying the operator, including the salary itself and the taxes paid in connection with its payment.
- Coop- number of packages produced.
Calculation example. Let's say an enterprise decided to pack bed linen, for which it purchased a unit costing UAH 3,000.00, with a resource of 300,000 packages and an electricity consumption of 200 W/hour, and rented a separate room of 10 square meters. m. at 30.00 UAH/sq. m. and hired an operator with a salary of 2000.00 UAH. The operator worked for a month (8 hours each working day) and produced 50,000 packages. In this case, the cost of producing one package will be:
Stizg = 3000 UAH / 300,000 pcs + (0.2 kW x 8 hours x 22 days x 0.25 UAH + 10 sq. m. x 30 UAH + 2000 UAH + 660 UAH) / 50,000 pack. = 0.159376 or 0.16 UAH.
Cost of packaging material
To calculate the cost of material spent on packaging (StMat), you must have data on the weight of 1 square meter. m. This is due to the fact that manufacturers of polymer films set their prices based on weight, not area. Accordingly, film is purchased in kilograms and consumed in meters.
Usually, the weight is 1 square. m is indicated by the manufacturer, or you can find out from the supplier. If such data cannot be obtained, the approximate weight of the film can be calculated. So, it is generally accepted that 1 sq. m. of film 1 micron thick weighs 1 gram. Therefore, if a film with a thickness of 20 microns is used, its weight is 1 square. m will be approximately 20 gr.
StMat = High x 2 x Shire X VSM X StM, Where
- High- package height.
- Shire- packaging width.
- VSM- weight 1 sq.m.
- StM- cost 1 kg. films.
Calculation example. Continuing the above situation, let’s assume that the company packs bed linen in polyethylene film with a thickness of 20 microns and a cost of 25 UAH/kg, resulting in a package size of 400 mm by 400 mm. The cost of film per 1 package will be:
StMat = 0.4 x 2 x 0.4 x 0.02 x 25.00 = 0.16 UAH.
Thus, the cost of one package for the example given will be approximately 32 kopecks. We use the term “approximately” because tolerances and rounding were used in the above example. In addition, as practice has shown, determining the weight of a film according to the principle “1 micron = 1 g” always slightly increases the cost of the material.
Cost is a financial reflection of the current costs of an enterprise for the sale and production of goods.
For the production sector, this indicator is the basis for creating prices. The basis of calculation is the calculation of distribution costs. And the process can be simplified using Excel.
Calculation of product costs in Excel
It has already been noted that each company will have its own list of costing items. But it is possible to substitute each of these into the existing framework, if necessary, change the formulas and take a ready-made calculation.
To calculate the calculation and example of the cost of the selling price, we will take these from the following table:
Costing calculation scheme:
- We calculate returnable waste from the costs of materials and raw materials (we take the specified percentage).
- To determine the additional salary, we take into account the following: if the main salary is more than 200 thousand rubles. then the additional one is equal to 10% of the main one; less than 200 – 15%.
- Payroll charges are 30% of the amount of the main and additional wages (the additional 10%, which was introduced in 2015 for an annual income of more than 600 thousand rubles, is not taken into account here).
- Equipment maintenance costs –
5% of the main salary.
- General business expenses – 9% of the average basic salary.
- General production – 18% of (25% OZP + 75% DZP). OZP is the main salary, DZP is additional.
- Production cost = the sum of the costs of maintaining equipment, materials and raw materials, fuel and energy, components, spare parts and additional costs, charges for salary, general production and general business costs minus returnable waste.
- Non-production costs (costs) – 3% of production costs.
- Total cost = production cost + production costs.
- We calculate the manufacturer's profit as a percentage of the total cost.
- Wholesale price = full cost + manufacturer's profit.
- VAT is calculated from the wholesale price.
- Selling wholesale price = manufacturer's wholesale price + indirect taxes (VAT in the example).
Based on the diagram, we will enter formulas and calculation data into an Excel spreadsheet.
Explanations for the calculation of some costing items:
- Returnable waste – =B2*12.54% (percentage taken from the first table).
- Additional salary – =If(B6
Source: exceltable.com
Product cost calculation
The production of any type of product is inevitably associated with costs: raw materials, electricity, transportation, workers' compensation, transfer of taxes to the budget, and others. It is advisable to reduce them; It is impossible to do without them completely. And in order to determine how much money the company needs to reimburse at the end of the product production cycle, you need to calculate the cost using a simple formula. It is also necessary to determine production as a whole.
The cost per unit of goods, like , can be calculated either manually or in the Microsoft Excel application designed for working with spreadsheets. The latter option is preferable: once creating a template or using a ready-made one, the user can subsequently make calculations simply by substituting new data into the example. We'll talk about how to calculate the unit cost of production in Excel.
Calculation of unit cost in Excel
SS= ΣР / О, where
- SS- cost;
- ΣР- the sum of all expenses incurred by the manufacturer;
- ABOUT- the total quantity of products produced in natural units (kilograms, meters, liters, pieces, and so on).
In the future, using the obtained value, you can calculate the market price of products, income and carry out other necessary actions. This can be done both in MS Excel and in specialized programs.
Important: the composition of expenses taken into account in the calculation of product costs should be determined taking into account the characteristics of production. There is no general list of articles, as with . For example, to make plastic photo frames you will need to purchase special glue, and to produce ball bearings you will need grinding materials and lubricants. In the first case, they are not needed, nor are adhesives in the second.
Unlike, which is quite difficult for an untrained user, even a beginner can calculate the cost of production in production in an Excel spreadsheet. Below is a small example of working with a spreadsheet.
A simplified procedure for calculating the cost of a product:
- In the first column of the e-book (it can be located anywhere on the page; the concept of “first” in this case is purely conditional) under the name “Product” you need to enter the name of one or more types of products.
- In the second column (“Raw Materials”) - the cost of raw materials or consumables purchased for the production of each specific type of product in rubles or any other applicable currency. If necessary, you can list the costs for each type of raw material used, and then calculate the amount: for example, to produce a plastic nesting doll, you will need to separately purchase plastic or hydrocarbons, paint, and decorative metal elements. However, in most cases, in order not to overload the table, to determine the cost of production it is enough to indicate the total amount without exchanging details.
- In the third column (“Transport”) - the costs of transporting raw materials (also in rubles or other local currency).
- In the fourth column (“Energy”) - the enterprise’s costs for providing the production line with electricity (also in rubles).
- In the fifth column (“Defects”) - the average percentage of defective products and waste for one production cycle (in percentages or shares).
- In the sixth column (“Salary”) - the total wages of employees employed in production.
- In the seventh column (“Quantity”) - the quantity of each type of product produced (in kilograms, liters, pieces, and so on).
- In the eighth column (“Amount”) you need to sum up the previously entered data.
- In order to calculate the sum, you should single-click the appropriate cell, press the “=” key and, successively clicking on the cells that make up the formula, sum, multiply and divide the values. To finish the calculation, you just need to use the Enter key. The result in rubles will be displayed in the same cell in which the calculations were made.
Advice: To check the correctness of the formula used, there is no need to double-click on the cells of the “Amount” column each time. You can simply mark the desired item with a single click: the order of arithmetic operations will be displayed in the top “status bar” of MS Excel.
The results obtained can be copied to a reporting form or, as in the case with, continue calculations in a spreadsheet editor.
Calculate production costs - download Excel template and sample
You can download a template for calculating the cost of a unit of production in production in the form of an Excel document from the link above.
You can download a ready-made example, which allows you to understand in more detail the order of operations performed, from the link above.
Let's sum it up
The cost per unit of finished products can be calculated not only in specialized programs, but also in the Microsoft Excel spreadsheet editor. The data is entered into the table in the appropriate columns and then summarized. At the end, you need to divide the gross cost of the product by the number of natural units, expressed in kilograms, pieces, liters, and so on.
The user can create a template for calculations independently or download a blank form and a sample calculation from the links above. You can work with both the template and the finished example in Excel or any suitable editor. To see what formula was used in the calculation, just click once on the cell of interest and pay attention to the “status bar” located at the top.