Analysis of the financial condition of the company in the conditions of market relations is of particular importance. This is due to the fact that only management decisions determine its results. And one of the easiest methods of financial analysis of strategic planning is precisely operational analysis, which monitors the dependence of the company's financial results on costs. To perform this analysis, you need to divide all costs into 2 groups: variables and fixed.
Instructions
Step 1
Fixed costs represent certain costs that do not depend in any way on changes in the volume of production. They can only depend on time. In this case, variable and fixed costs in the amount determine the size of the total costs.
Step 2
Fixed costs include the following expenses of the company: rent, property taxes, salaries of management personnel, security. All fixed costs are immutable only for the purposes of short-term analysis, because in the long term they can change due to, for example, changes in the size of the organization, financial arrangements, and insurance premiums.
Step 3
Because fixed costs do not in any way depend on the volume of products produced, a certain part of fixed costs in the cost of individual units of a product (goods) will decrease with an increase in volume, and vice versa, increase with a decrease in volume. In turn, this is what leads to an increase or decrease in value. And with a certain volume, which is determined by the break-even point, the cost of one manufactured product may become such that in this case the proceeds can only cover the costs.
Step 4
You can calculate fixed costs using a linear or declining balance method as follows: write off the cost of the cost over the number of years equal to the useful life of the product. Thus, the rate of fixed costs is equal to the sum of all depreciation charges that were made on fixed assets.
Step 5
In turn, fixed costs are divided in production costs into two types: fixed costs, determined by capacity, and management costs. The first group of fixed costs is determined by the fixed costs of all incurred costs incurred by the enterprise for redistribution. But the management costs are determined only by the general economic costs of the enterprise.
Step 6
You can also find the amount of fixed costs if you derive this indicator from the formula that determines the revenue: Revenue = Fixed costs - Variable (total) costs. That is, based on this formula, we get: Fixed costs = Revenue + Variable (total) costs.
