The main activity of the enterprise in the modern sector of the economy is the production of goods, the provision of services and the performance of work. The goal of all these activities is to make a profit. To get the maximum profit, you need to optimize the ratio of volumes and production costs. Production costs are understood as the costs of social labor associated with the production and sale of products. In some countries, the concepts of “costs” and “costs” are interpreted differently, but in domestic practice the term “production costs” is used to characterize costs.
Important for cost management is their classification. For planning, analysis, accounting and costing, there is the following cost classification by element:
· Single-element and complex (in composition);
· Costing articles and economically homogeneous elements (by type);
· Principal and invoices (as intended);
· Permanent and temporary (by type of relation to the volume of production);
· Production and non-production (by the nature of costs);
· Direct and indirect (by the method of classifying certain types of products at cost);
· Planned and not planned (according to the degree of coverage by the plan);
For the most convenient calculation of cost and profit, the following cost classification is highlighted:
· Inbox - there are acquired resources that are currently available. It is expected that such resources should bring good income in the future. In the balance sheet, such resources are displayed as assets in progress, inventories, goods, finished goods.
· Expired are resources expended, from which income has already been received, and which large ones cannot bring it. In the balance sheet they are reflected in the form of expenses for the production of goods sold, in other words, input costs are transferred to the expired.
It should be noted that the classification of expenses for incoming and expired is important for assessing the assets of the enterprise, calculating profit and loss.
For convenient costing, cost classification is also used for:
· Direct (the amount of costs is directly dependent on the volume of production) and indirect (costs not dependent on the volume of production);
· Non-manufacturing (not taken into account when assessing stocks) and included in the cost of finished goods (production costs associated with work in progress and finished goods production until its sale).
· Singleton (allocate material costs, deductions for special needs, labor costs, depreciation costs, other costs) and complex (consisting of several economic elements).
· Overhead (costs associated with maintenance and production management) and overhead (costs associated with the maintenance of equipment, apparatus of production units, etc.).
The following cost classification is used for equipment selection, assortment structure and price justification for decision making:
· Constants and variables;
· Temporary;
· Incremental;
· Marginal;
· Planned and not planned;
· Irrevocable;
· Costs taken into account and not taken into account in decision-making calculations.
There is also the so-called classification of costs for quality. According to one of the most famous costs are as follows:
· Preventive costs (incurred expenses for the production of products that will meet quality standards).
· Costs of quality assessment (expenses incurred in order to ensure that the manufactured products meet the requirements of consumers).
· Costs arising from the internal detection of a discrepancy in quality (the costs incurred in identifying a defective component or product of the production process until it goes on sale).
· Costs arising from the external detection of a discrepancy in quality (expenses incurred when the defect was discovered by the buyer).