BASIC GUIDELINES FOR IMPROVING THE METHODOLOGY FOR THE ANALYSIS OF THE FULL COST OF 100 BGN OF PRODUCTION

Abstract

The indicator “Full cost per production of BGN 100” is a key business indicator that characterises the
efficiency of the operations of enterprises carrying out industrial activities as their principal business. This indicator
is calculated as percentage ratio of full cost of production to the production value by net sales prices.
The relevance of this indicator and the methods for its analysis is due to the following facts:
1) The impact of three direct factors on the dynamics of the full cost per production of BGN 100 may be identified,
assessed and controlled:
 changes of the product range structure;
 changes of the full cost per product unit within the composition of sold products;
 changes of net sales prices of products.
2) The impact of expenses comprised in the full cost of production may be identified by classifying them on the
basis of appropriate criteria. For example:
 with view of the expenses’ relation to and dependence on the volume of sold products, they may be
classified as conditionally fixed and variable;
 classification of expenses by economic items: expenses on materials; expenses on staff, including wages
and salaries and social security and health insurance expenses; expenses on amortisation and other expenses.
 Classification of expenses by types of activities: expenses for principal activity; expenses for sale of
products and administrative expenses.
3) Efficiency may be analysed, assessed and controlled both by types of activities and by types of industrial
enterprise’s expenses.
The main source of information for the needs of the analysis of full cost per production of BGN 100 is the
accounting information created in the enterprise. Data are contained in the synthetic, financial-resultative account
“Sales revenue”.
The object studied in this publication is the indicator “Full cost per production of BGN 100”, and its subject matter
covers the direct factors affecting the change of actual versus basic full cost per production of BGN 100, as well as
the methods for analysis and evaluation of such influence.
The author’s objective is to suggest guidelines for improvement of the methods for analysis of the indicator “Full
cost per production of BGN 100”. The analytical information so obtained is useful with view of the opportunities for
being used in the process of making informed, proper, timely and efficient decisions for the management of cost of
sold products and the efficiency of the operations. Furthermore, the full cost per production of BGN 100 indicator is
directly related to the net sales revenue-based return (profitability of sales) – a summary indicator for the efficiency
of the industrial enterprise’s business. This information is also useful with view of the fact that the factors affecting
the dynamics of the full cost per production of BGN 100 are factors that influence the change of profitability of sales
with the same value but with opposite signs. This is due to the economic nature of the two factors for efficiency of
the enterprise’s operations mentioned above