Cost recovery

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In operational cost and performance accounting, cost recovery is the principle that the market prices for a product or service should cover the total costs ( full cost recovery ).


Every economy of economic subjects ( private households , companies and the state with its subdivisions of public administration , state-owned companies and municipal companies ) generates costs . These costs are initially borne by the economic agents and temporarily reduce their assets . Through the production process - which triggers costs - they create products or services that are sold on the market through the operational function of sales and thus generate sales . So that these sales revenues can (at least) cover the costs incurred, the price calculation must determine a market price that enables (at least) cost coverage.

Such questions of cost recovery play a role both in commercial companies and in the public sector . While the former, the rule corporate goal of maximizing profits follow, the latter either seek cost recovery principle (such as municipal waterworks or waste management ) or the subsidy principle (such as municipal museums or theater ) on.

Cost recovery rate

The economic key figure of the degree of cost recovery is available to determine the cost recovery . The degree of cost coverage indicates the proportion of a company's total costs in relation to its sales revenues. The total costs, made up of fixed costs ( ) and variable costs ( ), are compared with the sales revenue ( ):


With a cost coverage level of 100%, all costs are fully covered by the sales revenue, a cost coverage level of leads to losses , cost coverage levels of mean profits . Since commercial companies are long-term profit-oriented ( profit maximization ), their cost recovery rate will usually be over 100%.

Commercial companies

Full costs and lower price limit

The entrepreneurial calculation on the basis of full costs is often an expression of business ethics notions of a fair price , which, in addition to a profit premium, should cover the manufacturer's expenses and secure his existence. Full cost coverage means that there is a cost coverage level of 100% of the proceeds. Partial cost coverage with a cost coverage ratio of <100% only covers the variable costs ( marginal costs ) and leads to losses. The degree of cost recovery determines the lower price limit . The tactical lower price limit with a cost coverage ratio of <100% is only acceptable in the short term, a strategic (long-term) lower price limit corresponds to full cost coverage (plus profit margin).

Full costs and profit zone

At full cost recovery a company reaches the break-even point ( break even ) if, in addition to variable costs and the fixed costs of capacity are covered. The break-even point is accordingly the coverage point at which the break-even point is exceeded. With the help of the break-even analysis , the sales volume for which the full costs are covered is determined. The proceeds (E) cover the total costs (K):

The total costs are made up of the fixed and variable costs ( ):

Every price that is below the full costs and above the marginal costs still covers part of the fixed costs; it is therefore called the contribution margin .

Cost recovery principle in the public sector

Under the cost recovery principle is meant for public companies and administrations the principle that the charges for the use of any public performance fees and charges its costs should cover. The recovery of costs is viewed as a constitutionally permissible purpose of collecting fees, it is the main purpose of collecting fees. The estimated fee income for a public service must not exceed its expected costs; this is a cost overrun prohibition . It can apply to all administration fees , contributions and expenses . On the one hand, it is intended to protect the budget as a cost recovery requirement , on the other hand as a citizen-protective prohibition of cost overruns . This sets both the upper and lower limits of public fees. The cost recovery principle is an objective in which the prices or fees are calculated in such a way that they cover all or part of the total costs. There is no profit margin . Public administration ( authorities ), public companies and municipal companies work according to the cost recovery principle in fulfilling their public tasks ( services of general interest ). In the absence of profit margins, there is no competition from the private sector .

The formal authorization to levy fees and expenses for public services results from Section 1 (1) of the Federal Fees Act or the corresponding state fee laws. According to case law and prevailing opinion , the cost recovery principle has no constitutional status. Fees are to be provided as consideration for a “special service of the tax creditor triggered by special use of the administration” (Section 1 (1) BGebG in conjunction with Section 8 (1) RAO). The quality of a tax as an administrative fee depends on the fact that the tax is to be paid in return for an official act that affects the individual and is initiated by him. The cost recovery principle is an assessment maxim that makes demands on the objective of the fee collection.

The question of whether the cost recovery principle is adhered to must be answered separately for each budget year. Because the tariff structure based on cost recovery is only possible for the same period for which the administrative expenses are to be estimated . This means that the competent authorities - if they should recognize after a proper budget estimate and tariff setting during the current financial year that an unpredictable development of income will lead to the expenditure requirement being exceeded or not reached - are not obliged to change the fee tariff for the current year retrospectively or even only to be changed for the rest of the budget year. Compliance with the cost recovery principle is accessible to judicial control insofar as budget estimates influenced by irrelevant considerations are objectionable and the incorrect fee tariffs resulting therefrom are to be regarded as invalid.

The degree of cost recovery can also be determined in the public sector. The key figure is of particular interest here for local public transport , municipal companies and regulatory authorities. A determination of the degree of cost coverage for benefit and social administration, however, is not possible. In the municipalities there are only very few areas that approach a cost recovery rate of 100%; the average cost coverage levels range from approx. 10% for libraries to approx. 30% for day nurseries , 80% for local public transport and up to approx. 95% for funeral homes .

See also

Individual evidence

  1. ^ Siegfried Reinhold / Franz Scheuring / Bernd Zürn, Wirtschaftslehre für Sellers , 1980, p. 61
  2. Günter Wöhe , Introduction to General Business Administration , 25th edition, 2013, p. 30
  3. Klaus-Peter Kistner / Marion Steven, Business Administration in Basic Studies 2 , 1997, p. 171.
  4. Jump up ↑ Thorsten Franz, Making profits through municipal services of general interest , 2005, p. 352.
  5. BVerfG, judgment of March 19, 2003, Az .: 2 BvL 9/98
  6. a b BVerfG, decision of March 10, 1998, BVerfGE 97, 332, 345.
  7. BVerfGE 7, 244, 251
  8. Silke Schmidt, Gender Mainstreaming as a Challenge for Future-Oriented Personnel Work , 2003, p. 191
  9. ^ Franz Dirnberger, Practical Knowledge for Local Politicians: Acting Successfully as a Local, City, District and District Council , 2008, p. 333.