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NATURE OF COSTING - Coggle Diagram

- - - - Investment
        The company, in its desire to enrich itself and increase its assets to the maximum, is going to place some of its resources in goods and rights that it does not use in its production process, but in which it invests in order to control or exercise certain dominance over other companies. or to obtain rents.
        These goods and rights are called financial investments and, for accounting purposes, they are represented by asset accounts.
        
        There are several classifications of financial investments. Among others, the following can be pointed out:
        – Depending on the nature of the investment:
        • Shares, whether listed on the Stock Market or not, and capital shares in other companies.
        • Obligations and other fixed income securities issued by other companies.
        • Loans and non-commercial credits that the company grants. • Time deposits in deposit institutions.
        • Bonds and deposits constituted.
        – According to the degree of link provided by the investment:
        • Control portfolio, made up of investments made in other companies over which it exercises certain influence; As, normally, the entity is interested in keeping this power, it usually keeps them for more than a year, having a permanent character.
        
        Thus, it can include within this, the shares and fixed-income securities of group, associated and multi-group companies, non-commercial credits granted to any of these entities, etc.
- - - - Behavior of costs from the economic point of view.
        Total fixed manufacturing costs remain constant at any production volume.
        Total variable costs increase linearly, that is, in direct proportion to changes in production.
        The line for variable unit costs is constant and the line for fixed unit costs declines, more sharply at lower levels of production, where the effect of added units on fixed costs is greater, and less sharply at higher levels.
        The total cost per unit also shows a pronounced decline at the lower levels due to the influence of fixed costs.
        
        In economics it is considered that increases or decreases in variable costs occur at a variable rate. As a consequence, in economics the average variable unit cost also changes, which is constant in accounting.
        The unit costs that result from the accounting systems are average costs; the theory of economics deals with marginal costs. A marginal cost represents the increase in total costs that results from the production of one additional unit.
- - - - TOTAL COSTS By definition, and as mentioned above, the total costs incurred in the operation of a company during a given period are quantified by adding its fixed and variable costs, expressing this relationship as follows:
        TOTAL COSTS = FIXED COSTS + VARIABLE COSTS
        
        Costs reduction
        
        From fixed costs
        
        Make the most of installed capacity
        
        Improve staff productivity
        
        Of variable costs
        
        UNIT COST If the total costs of the company are equal to Fixed Costs plus Variables, it is not difficult to assume that the total unit cost is equal to the sum of the unit fixed cost plus the unit variable cost.
        TOTAL UNIT COST = UNIT FIXED COST + UNIT VARIABLE COST
      - Unit cost calculation
        The unit variable cost calculation is performed as already specified. If necessary, you should review it before continuing.
        The unit fixed cost can be realized in several ways. You can take the total of the fixed costs made the previous month. This amount is divided by the number of products produced in the same month or by the number of products that it is estimated will be able to be produced during the scheduled month.
        This is a very simple unit fixed cost calculation. However, it is not the only type of calculation. There are other ways of calculating it, which are used due to the amount of information they provide and the help they provide to control the performance of the workers.
        
        The fixed costs of the company are divided by the total hours worked, which gives the fixed cost per hour worked.
        The amount of time required for the raw materials to transform into the finished product is then calculated. For example, it may be that two hours are used to make some participants' shoes.
        Finally, the fixed cost per hour worked is multiplied by the number of hours needed to produce the unit of item. The result is the Unit Fixed Cost.
        
        As can be seen in both ways of calculating the unit fixed cost, an apportionment is made; that is, the amount of the total costs of the company is distributed proportionally among the products produced. Costs can be prorated when homogeneous units (all the same) are produced. If different units are produced, a calculation must be made for each class of product.