Among the factors influencing the operating profit prominently include the costs of production and sale of products. By operating expenses include:
- Cost of sales;
- Administrative expenses;
- Selling expenses;
- Other operating expenses.
Each kind of operating expenses decaying economic elements: material costs, wages, labor charges, amortization, other operating expenses.
Cost of sales includes direct material costs, direct labor costs, other direct costs and production overheads. Direct costs vary proportionally or nearly in proportion to production volumes. Overhead costs include production costs of auxiliary materials, labor management and production maintenance personnel to perform work related to the repair of equipment and so on. Thus, the cost of the finished product does not include administrative costs general business nature.
In "Administrative expenses" reflects general running costs associated with the maintenance and service of the company:
1) the cost of maintaining the administrative, commercial staff;
2) the cost of maintaining fixed assets, office (rent, taxes, insurance, depreciation, maintenance, security, utilities);
3) fees for professional services (legal, accounting, medical);
4) the cost of research and development;
5) communication costs;
6) amortization of intangible assets;
7) costs of an allowance for doubtful accounts, organizational costs;
8) the cost of registration of shares;
9) directors remuneration;
11) overhead (simple, overdue interest on the loan, the cost of materials, fines, penalties);
12) other administrative expenses.
The article "Cost of sales":
1) on the packaging of containers;
2) salaries and commissions to sellers, agents, drivers, workers, staff, VMTZ;
3) advertising and marketing;
4) business trip;
5) Payment services marketing, foreign trade intermediary organizations;
6) rent, taxes, insurance, depreciation, repairs of fixed assets sales department and warehouses;
7) freight and other payments for transportation;
8) granting of discounts to customers;
"Other operating expenses"
1) Cost of inventory;
2) doubtful (bad) debts;
3) Impairment losses of reserves;
4) operating costs of exchange rate changes;
5) recognized environmental sanctions;
6) deduction for these operating costs;
Proceeds from sales decomposes on costs and profits, ie it is the subject of distribution. In the course of this distribution can be manipulated proportions between income and expenses within certain limits. Influence of income due to changes in cost enables the current system of cost accounting. Thus, the costs are recorded when they are charged on manufactured products, which implemented. Costs for inventories of raw materials are capitalized in the balance consisting of working capital. Thus, stocks of finished goods, work in progress does not affect the profit because they are recorded in working capital, and only after the sale of products the process of writing off expenses for cost of sales. As a result there is a gap in time between the acquisition of reserves and payment of cancellation the cost of production.
These assumptions lead to the existence of two groups of methods to influence the amount of expenditure - real and formal.
If the actual methods associated with the direct effect on reducing material costs, complexity, and hence salary costs, the formal methods do not affect the natural values of costs and operate exclusively their cost values.
They are the prerogative of financial services companies.
Since stocks - a key element of the cost of goods sold, used different assessment methods inventory: FIFO, LIFO, the weighted average cost.
Evaluation of the cost of inventories FIFO method takes into consideration the value of the earliest time of receipt of inventory, including their balances at the beginning of the year, regardless of the cost and the date of the later of parties reserves. As a result of high inflation the cost of production reflects lower costs than those needed to replace the company spent reserves. At the same time, the company will be reporting higher profits, although it received from the storage reserves as a result of their movement.
The method LIFO is that the cost calculation released from the reserves for the reporting period made a set amount released since the last party that entered the warehouse. So take into account the cost of the most recent purchase stocks. Given inflation, this method leads to underreporting of income.
The third method of inventory valuation involves determining the weighted average cost of inventories at the beginning of the period and those that were purchased or produced during the period.
Using different methods of inventory valuation, you can get different values or gross operating profit. For the periodic inventory accounting method of calculating comparative description of the cost of inventories /
Lowest Cost of inventories is achieved when calculating the FIFO method, the highest - using the LIFO method, the average value - weighted average cost method.
The method defined inventory valuation accounting policies. It also determines the choice of depreciation methods. The fact that the traditional practice of most companies rectilinear uniform method of calculating depreciation is not always justified, especially in cases where the equipment is used with varying intensity throughout the useful life or moral rapidly aging. Therefore made more flexible methods of depreciation. Their selection depends on factors such as inflation, the availability of tax incentives, the pace of obsolescence and others. Volumes depreciation affect the amount of operating profit and is subject to cost management.
Cost management encompasses the analysis and evaluation of operating costs for their items. They are divided into controlled and uncontrolled. By controlled costs include premiums, payments based on participation in profits, travel expenses, entertainment and more. They are reducing the interest is not all, because to cut such costs is difficult, but possible.
Uncontrolled cover costs for utilities, rental obligations, salaries of employees and others. These expenses management can not change in the short term.