home Exchange rates See pages where the term sunk costs is mentioned. Sunk costs Sunk opportunity costs

See pages where the term sunk costs is mentioned. Sunk costs Sunk opportunity costs

Sunk costs have a distinctive feature that makes them stand out from other costs. Sunk costs are incurred by the firm once and for all and cannot be recovered even if the firm completely ceases its business. production activities in this area.

If a firm plans to enter into some new line of business or to expand its operations, then the sunk costs associated with this decision are precisely opportunity cost, associated with the beginning new activity. As soon as the decision to incur costs of this kind is made, sunk costs cease to be alternative costs for the company, because it has once and for all lost the opportunity to invest these funds anywhere. The fact that sunk costs actually have no connection with the current operations of the company is often expressed by the saying: “What falls off the wagon is lost.”

Social costs include all costs of manufacturing and selling products. They constitute the cost of the goods for the manufacturer and serve as the basis for determining the initial selling price - the offer price. This price allows the company to recoup the cost and make a profit. For example, the costs of an enterprise for the production of ballpoint pens include: costs for the purchase of materials, for the manufacture of pens. The social costs of ballpoint pens include: general, total costs, that is, the costs of production, advertising, and sales; they are expressed in the price of these pens.

Many economists have made significant contributions to the study of costs. For example, K. Marx's theory of costs is based on two fundamental categories - production costs and distribution costs. Production costs mean the costs of wages, raw materials and materials, this also includes depreciation of labor instruments, etc. Production costs are the production costs that must be incurred by the organizers of the enterprise in order to create goods and subsequently make a profit. In the cost of a unit of goods, production costs make up one of its two parts. Production costs are less than the cost of the product by the amount of profit.

The category of distribution costs is associated with the process of selling goods. Additional distribution costs are the costs of packaging, sorting, transportation and storage of goods. This type of distribution costs is close to production costs and, when included in the cost of goods, increases the latter. Additional costs are reimbursed after the sale of goods from the proceeds received. Net distribution costs - costs of trade (salaries of salespeople, etc.), marketing (study of consumer demand), advertising, costs of paying headquarters staff, etc. Net costs do not increase the cost of goods, but are reimbursed after sale from the profits created in the process of producing goods.

Speaking about the costs of production and circulation, K. Marx considered the process of formation of costs directly according to their main elements in production process. He abstracted from the problem of price fluctuations around value. In addition, in the twentieth century there was a need to determine changes in costs depending on the quantity of products produced.

Modern cost concepts developed by Western economists largely take into account both of the above points. At the center of the cost classification is the relationship between production volume and costs, the price of this type goods. Costs are divided into independent and dependent on the volume of products produced. IN Western countries The above-described division of costs (costs) into constant and variable is used, with direct and part of the indirect costs classified as variable, and the remaining part of indirect costs (independent of production volume) classified as constant. Often, the first of the above parts of indirect costs is allocated to a separate group - partially variable costs, since these costs do not change in value in direct proportion to changes in the volume of products produced. Dividing costs into direct and variable allows us to obtain an indicator - added value, determined by subtracting variable costs from the total income (revenue) of the enterprise. The added value therefore consists of fixed costs and net profit. this indicator allows you to evaluate the overall efficiency of production and sales, regardless of variable costs directly dependent on the volume of production.

In the CIS, dividing costs into conditionally constant and conditionally variable, calculated according to economic elements, is used when calculating savings from the influence of technical and economic factors. Such calculations are performed to determine the future planned cost of production based on the existing actual cost. This kind of calculation is not always advisable, since it only allows one to determine the increase in costs if conditionally fixed costs increased in direct proportion to the growth in the volume of production (an almost impossible situation).

Production costs have great importance in the formation of the final result of the enterprise’s activities - profit or loss. The final result of the activity consists of financial result from sales of products and income from non-sales operations, reduced by the amount of expenses for these operations. The final result is determined as the difference between revenue from sales of products at current prices and the costs of its production and sale. Therefore, to obtain the maximum possible profit it is necessary to reduce the costs of production and sales of these products. The main way to reduce production costs is to save all types of resources consumed in production - labor and material.

1.2.2 Sunk costs

Sunk costs have a distinctive feature that makes them stand out from other costs. Sunk costs are incurred by the company once and for all and cannot be returned even if the company completely ceases its production activities in a given area.

If a firm plans to enter into a new line of business or to expand its operations, the sunk costs associated with this decision are precisely the opportunity costs associated with starting a new activity. As soon as the decision to incur costs of this kind is made, sunk costs cease to be alternative costs for the company, because it has once and for all lost the opportunity to invest these funds anywhere. The fact that sunk costs actually have no connection with the current operations of the company is often expressed by the saying: “What's out of the bag is gone.” Social costs include all costs of manufacturing and selling products. They constitute the cost of the goods for the manufacturer and serve as the basis for determining the initial selling price - the offer price.

This price allows the company to recoup the cost and make a profit. For example, the costs of an enterprise for the production of ballpoint pens include: costs for the purchase of materials, for the manufacture of pens. The social costs of ballpoint pens include: general, total costs, that is, the costs of production, advertising, and sales; they are expressed in the price of these pens. Many economists have made significant contributions to the study of costs. For example, K. Marx's theory of costs is based on two fundamental categories - production costs and distribution costs. Production costs refer to the costs of wages, raw materials and supplies, and also include depreciation of funds, labor, etc. Production costs are the production costs that must be incurred by the organizers of the enterprise in order to create goods and subsequently make a profit. In the cost of a unit of goods, production costs make up one of its two parts. Production costs are less than the cost of the product by the amount of profit. The category of distribution costs is associated with the process of selling goods. Additional distribution costs are the costs of packaging, sorting, transportation and storage of goods.

This type of distribution costs is close to production costs and, when included in the cost of goods, increases the latter. Additional costs are reimbursed after the sale of goods from the proceeds received. Net distribution costs - costs of trade (salaries of salespeople, etc.), marketing (study of consumer demand), advertising, costs of paying headquarters staff, etc. Net costs do not increase the cost of goods, but are reimbursed after sale from the profits created in the process of producing goods. Speaking about the costs of production and circulation, K. Marx considered the process of formation of costs directly according to their main elements in the production process. He abstracted from the problem of price fluctuations around value. In addition, in the twentieth century there was a need to determine changes in costs depending on the quantity of products produced. Modern cost concepts developed by Western economists largely take into account both of the above points. At the center of the classification of costs is the relationship between production volume and costs, the price of a given type of goods. Costs are divided into independent and dependent on the volume of products produced. In Western countries, the above-described division of costs (costs) into fixed and variable is used, with direct and part of the indirect costs classified as variable, and the remaining part of indirect costs (independent of production volume) classified as constant. Often, the first of the above parts of indirect costs is allocated to a separate group - partially variable costs, since these costs do not change in value in direct proportion to changes in the volume of products produced.

Dividing costs into direct and variable allows us to obtain an indicator - added value, determined by subtracting variable costs from the total income (revenue) of the enterprise. The added value therefore consists of fixed costs and net profit. this indicator allows you to evaluate the overall efficiency of production and sales, regardless of variable costs directly dependent on the volume of production. In the CIS, dividing costs into conditionally constant and conditionally variable, calculated according to economic elements, is used when calculating savings from the influence of technical and economic factors. Such calculations are performed to determine the future planned cost of production based on the existing actual cost. This kind of calculation is not always appropriate, since it only allows one to determine the increase in costs in the event that conditionally fixed costs increased in direct proportion to the increase in the volume of production (a practically impossible situation).

Production costs are of great importance in shaping the final result of an enterprise's activities - profit or loss. The final result of the activity consists of the financial result from the sale of products and income from non-sales operations, reduced by the amount of expenses for these operations. The final result is determined as the difference between revenue from sales of products at current prices and the costs of its production and sale. Therefore, to obtain the maximum possible profit, it is necessary to reduce the costs of production and sales of these products. The main way to reduce production costs is to save all types of resources consumed in production - labor and material.

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Features of enterprise costs and ways to reduce them

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Production cost estimate Operating expenses Cost of production thousand rubles. thousand roubles. thousand roubles. 183017 1830 37.214 202896 2028 35.35 Finance Sales price Gross profit from sales Income tax (20%) Net profit thousand rubles. thousand...

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Calculation of basic economic indicators enterprises

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System analysis of enterprise behavior in various market structures

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Statistical study of production and distribution costs of an enterprise

Sunk costs have a distinctive feature that makes them stand out from other costs. Sunk costs are incurred by the company once and for all and cannot be returned even if...

2.4. Sunk costs, or expired costs

These costs are understood as the cost of already acquired resources, when the choice in favor of some alternative cannot affect the amount of these costs. These are costs that arose as a result of an earlier decision and which cannot be changed by any future decision. Expenses in the amount of 100 thousand rubles, the need for which has disappeared (see the previous example), are precisely irrecoverable costs. The category of sunk costs also includes the residual value of previously acquired property. If a machine (machine, mechanism) was purchased 4 years ago for 1,000,000 rubles. with an expected service life of 5 years and zero scrap value, then the residual value will be 200,000 rubles. with uniform depreciation. This residual value must subsequently be debited from the account regardless of what Alternative option action will be taken in the future. If the machine had been turned into scrap, then these 200,000 rubles would still have to be written off from the account.

This cost value cannot be changed by any future decision, and therefore the costs in this case are classified as sunk costs.

Sunk costs are not taken into account when making decisions, but there is a difference between this category and the category of costs not taken into account, since not all costs taken into account are sunk. For example, when comparing two alternative methods production, it may turn out that the amounts of costs for basic materials are the same for both methods, and, thus, the costs of basic materials can be classified as costs not taken into account. But the costs of materials will not be irrevocable in this case, since they will be incurred in the future.

Analysis of financial economic activity enterprises

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Economics of the enterprise IP Dubrovina O.G.

"right">Table 3 Fixed costs: Cost item Per month Per quarter Per year Rent 35,000 105,000 420,000 Electricity 1,200 3,600 14,400 Internet 500 1,500 4,500 Telephone 300 900 3,600 TOTAL 37,000 111,000 444 0 00 Transport ...

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SUNK COSTS

costs incurred by the company once, not requiring repeated costs, not depending on the volume of production, which at the same time cannot be returned by the company. Such costs include, for example, the cost of a company sign.

"SUNK COSTS" in books

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No. 33 IRREVERSIBLE LOSSES OF MILITARY EQUIPMENT AND WEAPONS OF THE SOVIET ARMED FORCES IN 1941–1942.

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No. 35 IRREVERSIBLE LOSSES OF MILITARY EQUIPMENT AND WEAPONS OF THE GERMAN LAND FORCES ON THE SOVIET-GERMAN FRONT IN THE PERIOD FROM JUNE 22, 1941 TO MARCH 20, 1942

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Appendix 4 Irreversible losses of the Wehrmacht in armored vehicles and anti-tank guns on the Eastern Front in 1941

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Irrevocable losses

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