implicit costs. The concept of economic costs. Explicit and implicit costs

Costs(cost) - the cost of everything that the seller has to give up in order to produce the goods.

To carry out its activities, the company incurs certain costs associated with the acquisition of the necessary production factors and the sale of manufactured products. The valuation of these costs is the cost of the firm. Most economically effective method production and sale of any product is considered such, in which the company's costs are minimized.

The concept of cost has several meanings.

Cost classification

• Individual- the costs of the company itself;
• Public- the total costs of society for the production of a product, including not only purely production costs, but also all other costs: protection environment, training of qualified personnel, etc.;
• production costs- these are costs directly related to the production of goods and services;
• Distribution costs- associated with the sale of manufactured products.

Distribution costs classification

• Additional costs circulation includes the costs of bringing the manufactured products to end consumer(storage, packaging, packaging, transportation of products), which increase the final cost of the goods.
• Net distribution costs- these are costs associated exclusively with acts of sale (wages of sales workers, keeping records of trade operations, advertising costs, etc.), which do not form a new value and are deducted from the cost of goods.

The essence of costs from the standpoint of accounting and economic approaches

• Accounting costs- this is the valuation of the resources used in the actual prices of their implementation. The costs of the enterprise in accounting and statistical reporting act as the cost of production.
• Economic understanding of costs is based on the problem of limited resources and the possibility of their alternative use. Essentially, all costs are opportunity costs. The task of the economist is to choose the most optimal use of resources. The economic costs of a resource chosen for the production of a good are equal to its cost (value) under the best (of all possible) options for its use.

If the accountant is mainly interested in the evaluation of the company's activities in the past, then the economist is also interested in the current and especially the forecasted evaluation of the company's activities, the search for the most the best option use of available resources. Economic costs are usually greater than accounting costs. total opportunity cost.

Economic costs, depending on whether the firm pays for the resources used. Explicit and implicit costs

• External costs (explicit)- these are the costs in cash that the company makes in favor of suppliers of labor services, fuel, raw materials, auxiliary materials, transport and other services. In this case, the resource providers are not the owners of the firm. Since such costs are reflected in the balance sheet and report of the company, they are essentially accounting costs.
• Internal costs (implicit) is the cost of own and self-used resource. The firm views them as equivalent to those cash payments, which would be received for a self-used resource with its most optimal use.

Let's take an example. You are the owner of a small shop that is located in a room that is your property. If you didn't have a store, you could rent out this space, say, for $100 a month. This is the internal cost. The example can be continued. When you work in your shop, you use your own labor, without, of course, receiving any payment for it. With an alternative use of your labor, you would have a certain income.

A natural question is: what keeps you as the owner of this store? Some profit. The minimum wage required to keep someone in a given line of business is called the normal profit. Unreceived income from the use of own resources and normal profit in the sum form internal costs. So, from the standpoint of the economic approach, production costs should take into account all costs - both external and internal, including the latter and normal profit.

Not explicit costs cannot be identified with the so-called sunk costs. Sunk costs- these are costs that are incurred by the company once and cannot be returned under any circumstances. If, for example, the owner of the enterprise suffers certain cash expenses to have an inscription on the wall of this enterprise with its name and type of activity, then by selling such an enterprise, its owner is ready in advance to incur certain losses associated with the cost of the inscription produced.

There is also such a criterion for classifying costs as the time intervals during which they occur. The costs that a firm incurs in producing a given volume of output depend not only on the prices of the factors of production used, but also on which factors of production used and how much. Therefore, short-term and long-term periods are distinguished in the activities of the company.

From the division of costs into alternative and accounting costs, the classification of costs into explicit and implicit follows. Explicit costs are determined by the amount of expenses of the enterprise to pay for external resources, i.e. resources not owned by the firm. For example, raw materials, materials, fuel, labor, etc. Implicit costs are determined by the cost of internal resources, i.e. resources owned by the firm.

An example of an implicit cost for an entrepreneur would be the salary that he could receive while working for hire.

Implicit costs, which are part of economic costs, should always be taken into account when making current decisions.

Explicit costs are opportunity costs that take the form of cash payments to suppliers of factors of production and intermediate products.

Explicit costs include:

§ workers' wages

§ cash costs for the purchase and rental of machines, equipment, buildings, structures

§ payment of transport costs

§ communal payments

§ payment of suppliers of material resources

§ payment for services of banks, insurance companies

Implicit costs is the opportunity cost of using resources owned by the firm itself, i.e. unpaid expenses.

Implicit costs can be represented as:

§ cash payments that a firm could receive with a more profitable use of its resources

§ for the owner of capital, implicit costs are the profit that he could receive by investing his capital not in this, but in some other business (enterprise)

Production and sales costs represent a set of expenses of enterprises expressed in monetary form for the production and sale of products (works, services). They ensure the continuity of production and create conditions for the sale of products.

first classifier: according to the method of occurrence:

· Production - costs directly related to the manufacture of products.

Commercial - costs associated with the sale of products

second sign: expediency

Productivity - costs that are justified and appropriate in the given production conditions.

· Unproductive - costs that are formed due to insufficient technology and organization of production, with losses from marriage, downtime, shortages, etc. third sign: according to the method of attributing to the cost of individual production:

1) direct - economically homogeneous costs related to the cost of a particular type of product directly in accordance with justified. Norms and regulations.

the fourth feature in relation to the technological process:

main costs. These include costs directly related to the technological processes of manufacturing products.

· Overhead costs. Not related to technological process production and are formed under the influence of certain production conditions. These include general production costs, costs associated with the implementation.

The fifth sign is according to the degree of dependence on changes in the volume of production .

· Variables. Costs, the amount of which directly depends on changes in the volume of production (raw materials, fuel and energy chains). Picture.

Fixed or conditionally fixed costs - costs, the absolute value of which does not change or changes slightly when the volume of production changes (heating, telephone costs). picture

The sixth sign - according to the degree of uniformity

Elemental or homogeneous costs - costs that cannot be divided into component parts (costs for raw materials, material, wages)

Complex costs - costs that consist of several homogeneous costs. (general production, general economic, commercial).

Seventh sign- depending on the time of occurrence and attribution to the cost of production.

· Current expenses. They arise mainly in a given period and are attributed to the cost of production of the same period.

· Future spending. They are carried out in a given period of time, but are included in the cost of production of subsequent periods in a certain proportion.

· Upcoming costs are costs that have not yet been incurred for which funds are reserved.

Reserves for reducing production costs are identified during the analysis for each item of expenditure. Cost savings can be obtained through specific organizational and technical measures.
Overhead savings reserves are identified based on their factor analysis for each cost item, due to a reasonable reduction in the administrative apparatus, economical use of funds, reduction of losses from damage to materials and finished products, downtime payments, etc.
Additional costs for the development of reserves for increasing production are determined separately for each type. This is mainly wages for additional output, consumption of materials, raw materials, energy and other variable costs, which change in proportion to the volume of production.
To determine their value, it is necessary to multiply the reserve for increasing output by the actual level of specific variable costs.
The main factors for reducing the cost of production:
raising the technical level of production;
improvement of the organization of labor and production;
change in the volume and structure of industrial products;

7. Role financial resources in the operation of the enterprise. Own and borrowed financial resources. Profit: essence, types, sources of formation and directions of use. Profitability and its types.

Financial resources of the organization- this is the totality of all funds and receipts available at the disposal of an economic entity.

The role of finance in economic activity organizations is manifested in the fact that with their help it is carried out:

1. maintenance of the individual circulation of funds, i.e., there is a change in the forms of value: the monetary form turns into a commodity, and then the goods acquire the monetary form of value back (after the completion of the production processes and the sale of finished products in the form of proceeds from the sale of products;

2. distribution of proceeds from the sale of goods (after payment of indirect taxes) to the fund for the reimbursement of material costs, including depreciation, the wage fund and net income acting in the form of profit;

3. redistribution of net income for payments to the budget (profit tax) and profit left at the disposal of the enterprise for production and social development;

4. use of profit left at the disposal of the organization ( net profit) for consumption funds, savings and other purposes provided for in its financial plan;

5. monitoring compliance with the correspondence between the movement of material and monetary resources in the process of individual circulation of funds, i.e., the state of liquidity, solvency and financial independence of the organization from external sources of financing.

In the domestic practice of planning and accounting, sources of financial resources are divided into own and borrowed. Own ones are considered the most reliable, since self-financing reduces the risk of bankruptcy and has certain advantages over competitors. The list of sources of own financial resources of enterprises includes:

* retained earnings; Reserve capital; accumulated depreciation charges; Extra capital; insurance indemnities in case of occurrence, funds off-budget funds and other funds received in the order of compensation; additional issue of shares, issue of depositary receipts.

Reserve capital joint-stock companies should form in without fail. A specific source of financing is additional capital. Unlike authorized capital, it is not divided into shares and shows the common property of all participants.

The formation and increase of additional capital can be carried out in the following cases:
1. Upon receipt of share premium.
2. When revaluing fixed assets.
3. In the event of exchange rate differences as a result of the formation of authorized capital in foreign currency.
4. When receiving targeted investment funds from the budget to finance capital investments (typical for non-profit organizations).

Additional capital funds can be used: to pay off the depreciation of fixed assets identified as a result of revaluation; to increase retained earnings on write-offs of amounts before valuation for retired fixed assets; to increase the authorized capital when making changes to founding documents; for distribution among the founders of the organization.

When internal sources financing is not enough to cover investment needs, joint-stock companies may resort to such an option as an additional issue of securities.

Cash resources that need to be produced for the production of products. For the firm, such costs act as payment for the acquired factors of production.

Costs are divided into fixed, variable and general. Fixed costs are those costs that a firm incurs as part of the production cycle. determined by the company itself. These costs will be present in all cycles of production of goods at this enterprise. Variable costs are costs that are carried over to in full for the finished product. Total costs are the costs that an enterprise incurs during the production stage. I.e general expenses represent the constants and in the sum.

Also, costs are classified into accounting (explicit costs reflected in the balance sheet), and also alternative. Accounting costs represent the price of the resources used at their acquisition prices. Opportunity costs are both explicit and implicit costs together.

In addition, there are external, private and public costs. External costs are part of the opportunity costs for which the company is not responsible. These costs are covered from the funds of other members of the society. For example, if an enterprise pollutes nature with its work and is not responsible for this, then the cost of compensating for pollution will be an external cost to other enterprises or persons. Private costs - part of the costs, which is formed directly by those who are engaged in this activity. Social costs are the sum of external and private costs.

Separation of costs into implicit and explicit

As already noted, from the division of costs into accounting and alternative costs, a classification into implicit and explicit ones follows.

The explicit costs of activity are determined by the total costs of the firm to pay for the external resources used, that is, those resources that are not owned by this enterprise. For example, it can be raw materials, fuel, materials, labor, and so on. Implicit costs determine the cost of internal resources, that is, the resources that the firm owns.

An example of implicit costs would be the wages an entrepreneur would receive if they were employed. Owner capital property also incurs implicit costs, since he could sell his property and deposit the proceeds in the bank at interest, or rent the property and receive income. When solving current problems, implicit costs should always be taken into account, and if they are large enough, it is better to change the scope of activity.

Thus, explicit costs are opportunity costs that take the form of payments to suppliers of intermediate products and factors of production for the enterprise. This category of expenses includes wages workers, payment of payment for suppliers of resources, payment for the services of insurance companies, banks, cash costs for the purchase and rental of machines, equipment, structures and buildings.

Implicit costs are understood as the opportunity costs of using resources that belong directly to the enterprise, that is, unpaid costs. Thus, implicit costs include cash payments that the enterprise could receive by more profitable use of its resources. For the owner of capital, implicit costs include the profit that the owner of the property could receive by investing in some other area of ​​activity, and not in this particular area.

Having studied the demand for its products, the firm can plan the volume of output of these products, minimizing its costs and maximizing profits.

Types of costs

Costs - these are the costs of economic resources (factors of production) used in the course of economic activity.

Part of these costs is carried out during the sale (circulation) of products, so they are called handling costs. But most of the costs are production costs (production costs) - the costs associated with the production of goods and services. In practice, they look like material costs, labor costs, interest on a loan. In this chapter, production costs will be considered first.

Exist different kinds costs (costs) of the firm. For example, explicit and implicit, direct and indirect, constants and variables.

Explicit and implicit (imputed) costs

To explicit include the cost of the firm to pay for the factors of production of economic resources.

The sum of explicit costs acts as the cost of production, and the difference between the market price of the sold products (ie, the company's income) and the cost - as profit.

However, the sum of production costs, if they include only explicit costs, may be underestimated.

For a more accurate picture, the costs should include not only explicit, but also implicit (imputed).

Implicit (imputed ) are called the costs of using those resources that are recognized as the property of the company.

These costs are not included in the firm's payments to other organizations or individuals. For example, the owner of land does not pay rent, however, by cultivating the land himself, he thereby refuses to rent it out and from the income that arises in connection with this. Individual entrepreneur is not hired by the factory and does not receive wages there. Finally, the entrepreneur who invested his own cash to his firm, cannot put them in the bank and receive bank interest.

Therefore, implicit (imputed) costs are loss of income which could be received by the owner economic resource when renting it out.

Implicit costs are one option opportunity cost, i.e. opportunity cost (see 1.4).

Taking into account not only explicit, but also implicit (imputed) costs allows you to more accurately assess the profit of the company. economic profit is defined as the difference between the market price and all (explicit and implicit) costs, in contrast to accounting profit, in the formation of which only explicit costs are taken into account.

Suppose you decide to renovate your apartment yourself. Your costs will be the cost of wallpaper, paint, glue, etc. However, while renovating your apartment for several days, you give up another job where you could receive a certain income (for example, 10 thousand rubles). Your cost structure will look like this:

Obviously, if the repair office for the same work (without the cost of materials) requires less than 10,000 rubles, then you will prefer to apply there, and if more than this amount, you will repair the apartment yourself.

Fixed and variable costs

The criterion for dividing costs into fixed and variable is their dependence on changes in the volume of production and sales. This classification has great importance to justify decision-making and planning the production process, so we will dwell on these costs in more detail.

Permanent costs (FixeD costs, FC) do not change with changes in the volume of production, remain stable. These include primarily depreciation of fixed capital (machinery and equipment, buildings, structures, etc., see 16.2), advertising costs, rent etc.

Variables costs (Variable costs, VC) increase with the expansion of output and decrease with its reduction. Variables include the cost of labor force, raw materials and materials, etc., which change depending on the change in the scale of activity. Certain distribution costs, such as commissions to resellers, telephone charges, stationery, also grow with the growth of the business and are therefore classified as variable costs.

However, it is quite difficult to make a clear division of costs into fixed and variable, since some of their types can be classified as both fixed and variable. In this case, one speaks of conditionally constant or conditionally variable costs. For example, part of the wages of workers, which depends on output, refers to variable costs, the other part, paid regardless of the amount of output, is fixed.

The complexity also lies in the fact that the division of costs into fixed and variable can be carried out only in relation to a certain period of time. The division of costs into fixed and variable implies the conditional allocation of short-term and long-term periods in the activities of the company. Short-term is understood as such a period in the work of the company, when the company does not buy new equipment, does not build new buildings, etc. In the long run, the firm can expand its scale, so in the long run all its costs are variable.

The decision to classify certain costs as fixed or variable is made for each specific enterprise, taking into account the specifics of its costs and the specific period of its activity.

The sum of fixed and variable costs is gross (cumulative ) firm costs ( Total costs , TS).

Average cost

Under average is understood as the costs of the firm for the production and sale of a unit of goods.

There are several types of them:

• average fixed costs ( Average fixed costs, AFC ) are calculated by dividing the fixed costs of the firm by the volume of production;
• medium variable costs (Average variable costs, A VC ) are variable costs per unit of output;
• average gross costs, or the total cost of a unit of product ( Average total costs, ATC ) is the sum of average variable and average fixed costs, or the quotient of gross cost divided by output.

Table 11.1

Fixed, variable, gross and average costs of the firm

From the data in Table. 11.1 shows that the average gross costs decrease with the growth of production volume. This is because as the firm expands, the fixed costs of the firm are borne by more and more large quantity products, resulting in lower prices.

Average variable and average gross costs can behave differently when the volume of production increases. In our example, the average variable costs are the same for volumes from 100 to 300 pieces, with further expansion (up to 600 pieces) they increase. Average gross costs decrease with volume growth up to 400 pieces, then they increase.

The nature of production costs

The production of products, excluding the occurrence of any costs, is impossible in itself. Absolutely any decision to produce something inevitably entails either the rejection of resources in the production of certain products in order to regroup them for the production of a new product, or the rejection of payments or income that will be used to purchase the resources necessary for new production.

The functioning of any enterprise is always based on the use of a number of factors of production, from the use of which income is obtained. Factors of production are particularly important elements that can have a decisive impact on the performance of all production activities. The main factors of production include:

• earth;
• capital;
• work.

Economists also often single out such factors as entrepreneurship itself and time.

Remark 1

Real entrepreneurial activity always involves the search for such a combination of components of production activity that will give the maximum output of the final product at minimum cost.

The great variability of such combinations is due to both the state of the markets and scientific and technological progress. Production is mobile due to constant discoveries, changes, innovations. The organization itself is in constant search for new ways of production and more rational development. In these processes, knowledge and the ability to correctly estimate the costs of production activities can be of great service to further activities.

The costs that an organization faces in the production process include:

• payments to investors;
• employees;
• owners of the resources needed in production.

These payments are intended to attract the necessary factors of production. All these costs can also be classified into explicit and implicit.

Explicit costs

Definition 1

Explicit costs are costs that take the form of cash (direct) costs.

These include payments to suppliers of factors of production, as well as intermediate products necessary for the production of the final product. Also, explicit costs include salaries to employees of the enterprise, payments to trading firms, banks and other financial service providers.

All explicit costs must be reflected in financial statements enterprises, in connection with which they are often called accounting costs. They represent payments on external obligations when attracting factors of production, as well as accrued expenses, such as depreciation.

One way or another, absolutely all the explicit costs of the firm, in the end, come down to the reimbursement of the used factors of production.

Implicit costs

In the event that only explicit costs are included in the amount of production costs, then the final figure may turn out to be greatly underestimated, respectively, the amount of expected profit will turn out to be excessively overestimated. In order to more accurately predict the outcome of a decision, costs should include not only explicit but also implicit costs.

Definition 2

Implicit costs are the costs of using resources owned by the producing organization itself.

They do not include payments by the organization to other firms or individuals. These costs are not stipulated by any contracts, are not obligatory for explicit payments. Despite the fact that implicit costs are not reflected in the financial statements, they do not become less real from this.