How To Find Variable Costs

Table of contents:

How To Find Variable Costs
How To Find Variable Costs

Video: How To Find Variable Costs

Video: How To Find Variable Costs
Video: Fixed and Variable Costs (Cost Accounting Tutorial #3) 2024, March
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Variable costs are types of costs, the amount of which can change only in proportion to the change in the volume of production. They are contrasted with fixed costs, which add up to total costs. The main feature by which it is possible to determine whether any costs are variable is their disappearance when production stops.

How to find variable costs
How to find variable costs

Instructions

Step 1

According to IFRS, there are only two types of variable costs: production variable indirect costs and production variable direct costs. Production variable indirect costs - costs that are almost or completely in direct dependence on changes in the volume of the enterprise, however, due to production technological features, they are economically impractical or cannot be directly attributed to the products produced. Production variable direct costs - those costs that can be directly attributed to the cost of specific products on the basis of data in primary accounting. Indirect variable costs of the first group are: all raw materials costs required for complex production. Direct variable costs are: costs of fuel, energy; costs for basic materials and raw materials; workers' wages.

Step 2

If products are not produced at the enterprise, then variable costs will be equal to zero. In order to find variable costs, you need to know how much are the total costs and fixed costs in a given enterprise.

Step 3

In order to find the average variable costs, you need to divide the total variable costs by the required amount of output.

Step 4

Let's calculate the variable costs using the example: Price per unit of manufactured product A: materials - 140 rubles, wages for one manufactured product - 70 rubles, other costs - 20 rubles.

Price per unit of manufactured product B: materials - 260 rubles, wages for one manufactured product - 130 rubles, other costs - 30 rubles. Variable costs per unit of product A will be equal to 230 rubles. (add up all costs). Accordingly, the variable costs per unit of product B will be 420 rubles. Keep in mind that variable costs are always associated with the release of each unit of the product. Variable costs are those values that change only when the quantity of a given product is changed and include different types of costs.

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