Fixed cost proportionalization

In cost accounting, fixed cost proportionalization is the distribution of incurred fixed costs to the individual product units in order to determine the total unit costs of a product unit in this way .

General

As a rule, companies do not have a constant degree of utilization , but rather the capacity utilization is subject to fluctuations depending on demand . In extreme cases, these fluctuations lead either to underemployment (e.g. through short-time work ) or overemployment ( overtime ), which in actual cost accounting impairs a proper cost analysis in cost management . Therefore, standard cost accounting tries, among other things, to mathematically compensate for fluctuations in the output quantity ( fluctuations in employment ). The problem of fixed cost proportionalization is not eliminated by this, but it is leveled out by orienting it to an arithmetical average employment.

detection

The total unit costs are made up of the variable unit costs and the total fixed costs , with the latter being divided by the output quantity : ${\ displaystyle k}$ ${\ displaystyle k_ {v}}$ ${\ displaystyle K_ {f}}$ ${\ displaystyle x}$

{\ displaystyle k = k_ {v} + {K_ {f} \ over x}}

.

The more the output volume increases, the lower the fixed unit costs and vice versa.

Fixed cost degression

Fixed cost degression occurs if - for a given company size - the constant fixed costs with increasing output become noticeable through falling unit costs:

{\ displaystyle \ lim _ {x \ to \ infty} {k_ {v} + {K_ {f} \ over x} = k_ {v}}}

.

This means that the total unit costs decrease with each additional unit produced and approach the variable costs. The cost function of the unit costs is therefore degressive . This effect is also called fixed cost degression .

This results in the company 's corporate goal of striving for full employment as far as possible . This reduces existing idle costs and turns them into utility costs . The fixed cost degression effect plays an essential role in the law of mass production . It means that companies can lower their prices (such as in mass tourism ) or increase their profits if prices remain constant . This gives them cost advantages over their competitors.

economic aspects

The distribution of fixed costs over the output volume is unsuitable for preparing business decisions or planning costs in the context of controlling . The fixed costs are unjustifiably added to the individual product units, although they are generally not related to their occurrence and, in particular, to the output quantity. For example, a machine is required to manufacture products, but the resulting fixed costs (e.g. depreciation , rental costs for the production hall) are independent of how many products are later manufactured with this machine. Due to the degression of fixed costs, the unit costs appear to be lower with each newly produced unit. However, this is only an "artificial" saving, since the fixed costs are in fact already planned or spent (so-called sunk costs ). The unit costs determined in this way do not arise in full if a new product unit is manufactured. The proportionalization of fixed costs does not give the decision-relevant costs of an entrepreneurial decision.

Individual evidence

↑ Dieter Rüth, cost accounting , Volume 2, 2013, p. 15

↑ Götz von Berkstein, Business Handbook of Formulas and Key Figures , 2010, p. 123

↑ Jürgen Heinrich, Medienökonomie: Volume 1 , 2001, p. 74

↑ Götz von Berkstein, Business Handbook of Formulas and Key Figures , 2010, p. 124

↑ Ulrich Brecht, Business Administration for Executives , 2012, p. 57 f.

[1] Dieter Rüth, cost accounting , Volume 2, 2013, p. 15