Features direct and indirect costs in the enterprise

Before opening a new business is to accurately estimate future project costs. After all, they will depend on such important factors as profitability of the project and the timing of his return. The activity of any enterprise is impossible to imagine without the cost of certain resources. All the cost that involves the implementation of a business project can be divided into direct and indirect. All of these costs need to try to accurately predict in order to prepare a business plan.

Costs play a big role in the activities of the organization. The magnitude of the costs depends on the financial result from the sale of finished products, works, services. After all, the financial result is determined as the difference between the proceeds from the sale of products without deductions, provided by legislation and the cost of its production and sales. Thus, the costs associated with the production and sale of products, have a direct impact on the cost of goods or services.

To classify the concept of cost into direct and indirect (vnerealizatsionnyh) it is extremely important for the correct distribution of the tax base for profit tax. Direct costs are redistributed on sold and unsold products, the rest goes to unfinished production. All expenses that the company does not consider direct, automatically pass into the category of indirect. Indirect costs are recognized as expenses associated with selling the product. They are fully in the expenses that affect taxation. If the records of the direct costs is quite clear and understandable, the treatment of indirect costs has its difficulties. As the direct cost impact on the cost and the selling price of the item, it is important to make the distribution between the cost groups.

Also note that indirect costs for one company is a direct cost for another. Sometimes the same expenditure can change the category. For example, advertising a particular service refers to the direct costs, advertising of the organization as a whole – have indirect costs. Before classifying the costs, you need to give them the correct definition. For this purpose, you can refer to article 253 of the tax code. [1]

Direct costs are expenses directly associated with the manufacture of certain types of products. They are costed in the cost. The tax code does not define direct costs, only gives a rough list. The enterprise itself should classify costs and to register them in the records. It is necessary for rational taxation. Typically, direct costs include: Basic materials; Accessories; Semi-finished products; Wages and deductions; other direct costs.

In this list it is necessary to clarify the latest position. This includes equipment rental, installation and preparation for operation of this machinery (cooling machines, commissioning of production machinery for a specific type of product, disposal of the material).

Cost management is an important process of accounting, analysis, planning, cost control, the result of which is development of managerial decisions aimed at optimization and cost reduction. Organizations, giving priority to effective cost management and able methodically correctly to organise this work have a great advantage in business:

To solve the problem of determining the cost of installing individual absorption rate, which reflects the proportion overhead costs per unit of product. One method – the proportional distribution of indirect costs on all direct costs. The variant of division of indirect costs to the production cost of labor. Accounting of indirect costs will help to realistically assess the cost. However, with the change of the base of redistribution will change the result.[2]