Material costs of the enterprise

The production activity of any enterprise is associated with the implementation of various costs. They are an indicator of past and future capabilities of involving economic resources in all production processes in the interest of achieving the ultimate goal. One of the main types of such costs is material costs. Their planning is the process of setting goals for the entire organization and for its individual units. Goals are set in the form of production tasks and the provision of funds intended for their implementation.

Material costs are the largest element of production costs, the share of which often amounts to 90% of the total cost. The smallest share of these expenditures was recorded only in extractive industries. Material costs are very heterogeneous. They include the costs of materials and raw materials (excluding returnable waste). Their cost includes the payment of brokerage and intermediary services, commissions. The entire cost of materials and raw materials is included in the cost price without VAT.

Material costs include the cost of:

- Purchased materials, raw materials;

- services and works performed by third-party organizations or structural subdivisions of the enterprise;

- semi-finished products, various components that require additional processing (raw materials and materials that have undergone some processing stages, but do not become finished products, refer to the purchased semi-finished products);

- Natural mineral raw materials and resources in terms of the allocated allocations for geological exploration and expenses for remediation work;

- purchased fuel used in the technological process, and for the production and energy needs of the enterprise;

- Loss of material values (according to the norms of natural loss).

In the production all materials and raw materials are released only in accordance with the established norms of consumption at the enterprise. Monthly, on the basis of production programs and norms for each type of product and shop (subdivision), the need for raw materials and materials is calculated. This amount can vary with the changing conditions of production.

Enterprises separately take into account direct material costs, which include the costs of materials and raw materials (they become part of the product, so their cost directly relates to certain finished products). The magnitude of these costs is not always calculated by multiplying the natural indicators used for production. In some cases, these indicators are too large. Such materials are classified as auxiliary. These costs are attributed to the company to indirect material costs, which include general production costs. Each enterprise, on the basis of its specifics, decides independently which materials belong to the main, and which to the auxiliary ones.

Material costs are controlled by four main methods: documenting (made out by separate documents), party cutting (distribution of materials and raw materials on the account card - cutting sheet), batch control and accounting (forming batches of materials and raw materials on homogeneous technological parameters), inventory (inventory of material residues And raw materials).

In some industries, the distribution of materials and raw materials by types of marketable products is carried out directly. In a number of industries, they are correlated by product groups, so they are classified using an indirectly-normative or coefficient method. Material costs are assessed according to specific conditions of economic activity.