Methodology for rationing current assets. Capital rationing
The need for working capital is determined by the enterprise when drawing up a financial plan.
The value of the standard is not constant. The size of own working capital depends on the volume of production, supply and sales conditions, the range of products produced, and the forms of payment used.
Rationing of working capital carried out in monetary terms. The basis for determining the need for them is the cost estimate for the production of products (works, services) for the planned period. At the same time, for enterprises with a non-seasonal nature of production, it is advisable to take the data of the fourth quarter as the basis for calculations, in which the production volume is, as a rule, the largest in the annual program. For enterprises with a seasonal nature of production, data from the quarter with the lowest production volume, since the seasonal need for additional working capital is provided by short-term bank loans.
In the process of standardization, private and aggregate standards are established. Private standards include working capital standards in production inventories: raw materials, basic and auxiliary materials, purchased semi-finished products, components, fuel, containers, low-value and wear-and-tear items (IBP); in work in progress and semi-finished products of own production; in deferred expenses; finished products. By adding up private standards, the total working capital standard is determined.
1) When determining the working capital standard for raw materials, basic materials and purchased semi-finished products, their average daily consumption (P SUT ) , which is equal to the ratio of the annual (quarterly) consumption of a given element in production to the number of days in the period:
Further development stock standards- relative values corresponding to the stock volumes of each element of working capital. Typically, standards are set in days of supply and indicate the duration of the period, provided by this type of material assets.
Working capital stock norm for each type or homogeneous group of materials (N Z ) takes into account the time spent in current, insurance, transport, technological and preparatory stocks.
Current stock(3 TEK ) – the main type of stock necessary to ensure uninterrupted operation of the enterprise between two next deliveries.
Safety stock(3 STR ) is formed in case of violation of delivery deadlines and other unforeseen circumstances.
Transport stock (3 TR) is formed when payment requests arrive earlier than material assets. The transport inventory time is equal to the difference between the cargo turnover time and the document circulation time.
Technological stock(3 THOSE ) is created in cases where incoming material assets do not meet the requirements of the technological process and, before being put into production, undergo appropriate processing (drying, stripping, peeling, heating, grinding, etc.). This stock is taken into account if it is not part of the production process.
Preparatory stock (3 UNDER ) is associated with the need to receive, unload, sort and store inventory.
Working capital standard for each type of raw material provides for the summation of all these types of reserves:
N OS = Z TEK + Z STR + Z TR + Z TECH + Z UNDER.
Wherein, current stock (Z TEK ) is defined as the product of the average daily consumption (R SUT) by the interval between two deliveries (I), which represents the current stock rate:
Z TEK = P SUT · I,
Safety stock (Z STR ) is defined as the product of half the average daily material consumption (P SUT) by the gap in the intervals of planned and actual deliveries (AND FACT - AND PL):
Z STR = P SUT · (AND FACT - AND PL) · 0.5.
In case of an aggregated assessment, the safety stock can be taken in the amount of 50% of the current stock. In cases where an industrial enterprise is located far from transport routes or non-standard, unique materials are used, the safety stock rate can be increased to 100%. When supplying materials under direct contracts, safety stock is reduced to 30%.
Transport stock (Z TR ) can be defined in the same way as safety stock.
Z TR = P SUT · (AND FACT - AND PL) · 0.5.
Technological stock (Z TECHN ) is calculated as the product of the material manufacturability coefficient (K TECH) by the sum of current, insurance and transport stocks:
Z TECH = (Z TECH + Z STR + Z TR) ·K TECH.
The material's manufacturability coefficient is established by a commission consisting of representatives of suppliers and consumers.
Preparatory stock (3 UNDER ) determined based on timing.
2) Working capital standard for auxiliary materials is calculated in the same way as the standard for basic raw materials. When using a wide range of auxiliary materials, at least 50% of the annual consumption should be calculated. Other auxiliary materials are determined on the basis of consumption for the past year and actual balances.
3) Working capital standard for spare parts is established based on actual consumption per 1 rub. the cost of all equipment by dividing the working capital standard by the book value of the equipment. For large unique equipment, the working capital standard for spare parts is calculated using the direct counting method for each part, taking into account its service life and price using the formula:
,
where B is the number of mechanisms (equipment) of one type, pcs.;
n is the number of parts of the same name in each mechanism, pcs.;
D - the norm of stock of parts, days;
K - reduction coefficient;
T - service life of the part;
C - price of the part, rub.
4) The amount of stock in work in progress calculated using the following formula:
N NP = Q SUT · C ED · D PC · K NZ, = C SUT · D PC · K NZ,
where Q SUT is the quantity of products produced per day (t., l., pcs., etc.);
C ED - cost per unit of production, rub.;
With SUT - average daily costs for production, rub.;
D PC - duration of the production cycle in calendar days;
K NZ - cost increase coefficient, characterizing the level of product readiness as part of work in progress.
When determining the impact on the amount of work in progress by the cost increase coefficient (C NC), all costs in the production process are divided into one-time (initial) ones, i.e. costs incurred at the beginning of the production cycle (raw materials, basic materials, etc.) and increasing costs (depreciation, wages, steam, water, energy, etc.). Costs increase in the production process evenly and unevenly. With a uniform increase in costs, the coefficient is calculated as follows:
,
where FIRST - initial costs;
With NAR - other costs;
WITH FULL - the sum of all costs (FROM FIRST + WITH NAR);
5) Working capital standard for deferred expenses determined by the formula:
N RBP = O NG + R B.PL – R S.PL,
where ONG is the balance of expenses at the beginning of the planned year;
R B.PL - deferred expenses incurred in the planned year;
R S.PL - part of the expenses that is written off as cost in the planned year.
6)
Standard for finished products is calculated as the product of the planned cost of the average daily output of marketable products (with SUT) by the time from the beginning of its receipt at the warehouse to its departure from the station, taking into account the time for selection, packaging, storage, loading, registration of transport and settlement documents, etc. ( 
):
N GP = C SUT 
,
Where 
- stock norm in days for finished products.
7)The total standard of working capital at the enterprise(N OS), equal to the sum of standards for all elements, determines the total need of an economic entity for working capital:
,
N OS i - private standard.
But the composition of working capital (capital) necessary for an enterprise to implement normal business conditions includes, along with regulated working capital, also non-standardized ones.
The main elements of non-standardized working capital are: goods shipped; funds in accounts receivable and other settlements arising due to the specifics of settlements, forms and speed of cargo movement; cash; short-term financial investments in securities. Non-standardized working capital cannot be taken into account in advance and calculated like normalized working capital. However, enterprises have the opportunity to influence their value and manage these funds using financial management methods (settlements, loans).
The amount of standardized and non-standardized working capital determines the total need of the enterprise for working capital.
Determining the enterprise's need for its own working capital is carried out in the process of rationing, that is, determining the working capital standard.
The purpose of rationing is to determine the rational amount of working capital diverted for a certain period of time into the sphere of production and the sphere of circulation.
The need for own working capital for each enterprise is determined when drawing up a financial plan. Thus, the value of the standard is not a constant value. The size of own working capital depends on the volume of production, supply and sales conditions, the range of products produced, and the forms of payment used.
The rate of working capital is nothing more than the number of days during which working capital is diverted into inventories, starting from the payment of the invoice for materials and ending with the moment of their transfer to production. It includes:
- · transport stock, which is defined as the difference between the cargo turnover time and the document circulation time. (Document flow - time to send settlement documents and submit them to the bank, time to process documents at the bank, postal travel time for documents.) In practice, its value is determined on the basis of actual data for the previous year;
- Preparatory stock - time for unloading, receiving and warehouse processing received materials are determined based on fact;
- technological stock - time to prepare materials for production . This applies to those materials that cannot immediately go into production (wood - drying, grain - processing, etc.);
- · current warehouse stock . It is needed to ensure continuity of the production process between two adjacent supplies of materials;
- · guaranteed (insurance) stock required in case of unforeseen circumstances. It is usually set at 50% of the current warehouse stock.
Thus, the total stock rate in days for raw materials, basic materials and purchased semi-finished products generally consists of the five listed stocks.
To determine the standard, the average daily consumption of standardized elements in monetary terms is taken into account. For production inventories, the average daily consumption is calculated according to the corresponding item in the production cost estimate: for work in progress - based on the cost of gross or marketable output; for finished products - based on the production cost of marketable products.
In the process of standardization, private and aggregate standards are established. The standardization process consists of several successive stages:
First, stock standards are developed for each element of standardized working capital. The norm is a relative value corresponding to the volume of stock of each element of working capital. As a rule, standards are established in days of supply and mean the duration of the period provided by a given type of material assets. The stock rate can be set as a percentage, in monetary terms, to a certain base.
Working capital standards are developed at the enterprise by the financial service with the participation of services related to production and supply and sales activities.
Next, based on the stock norm and consumption of a given type of inventory, the amount of working capital necessary to create standardized stocks for each type of working capital is determined. This is how private standards are determined.
And finally, the total standard is calculated by adding up the private standards. The working capital standard is the monetary expression of the planned stock of inventory assets, the minimum required for the normal economic activities of the enterprise.
The standard for working capital advanced in raw materials, basic materials and purchased semi-finished products is determined by the formula:
N = Npz*Spz, Where
N - standard working capital in stocks of raw materials, basic materials and purchased semi-finished products;
C pz - average daily consumption of raw materials, materials and purchased semi-finished products;
N pz - stock norm in days.
The average daily consumption for the range of consumed raw materials, basic materials and purchased semi-finished products is calculated by dividing the sum of their costs for the corresponding quarter by the number of days in the quarter.
Determining the stock norm is the most labor-intensive and important part of rationing. The stock norm is established for each type or group of materials. If many types of raw materials and supplies are used, then the standard is established for the main types, which occupy at least 70-80% of the total cost.
Working capital standard for work in progress must ensure a rhythmic production process and a uniform supply of finished products to the warehouse. The standard expresses the cost of production of products that have begun but are not completed and are at various stages of the production process. As a result of standardization, the value of the minimum reserve sufficient for normal production operation must be calculated.
Rationing of working capital in work in progress is carried out by groups or types of products for each department separately. If the range of products is varied, then the standard is calculated based on the main products, constituting 70-80% of its total mass.
The standard for working capital in work in progress is determined by the formula:
N=Nnp*Svp, Where
SVP - one-day costs for the production of gross output;
Nnp - working capital norm for work in progress,
Nnp = Pts * Kn
Pc - duration of the production cycle in days;
Kn - cost increase coefficient.
One-day costs are determined by dividing the cost of production of gross (commodity) output of the corresponding quarter by 90.
Standard for the article "Future expenses" are calculated by the formula:
N=Rng+Rpl-Rsp, Where
Rng - the amount of deferred expenses at the beginning of the planning period;
Rpl - expenses incurred in the planning year;
Rsp - expenses included in the cost of production of the planning period.
Working capital standard for finished products determined by the formula:
N=Ngp*Wtp, Where
VTP - one-day release of commercial products
NGP - working capital norm for finished products.
In this way, private standards are established for each element of regulated working capital. Then the total standard of working capital is determined, reflecting the total need of the enterprise for its own working capital in the planning period, by adding up private standards.
Next, it is necessary to compare the resulting total standard with the total standard of the previous period in order to determine how the enterprise’s need for its own working capital changes in the planning period.
The difference between the standards is the amount of increase or decrease in the working capital standard, which is reflected in the financial plan of the enterprise.
The following methods of rationing working capital can be distinguished:
1) direct counting method. It involves a reasonable calculation of inventories for each element of working capital, taking into account all changes in the level of organizational and technical development, transportation of inventory, and the practice of settlements between enterprises;
2) analytical method. It involves an integrated calculation of the working capital standard, taking into account the ratio of the growth rate of production volume and the value of standardized working capital;
3) coefficient calculation method. When using this method, a new standard is determined on the basis of the standard of the previous period by making changes to it, taking into account the conditions of production, supply, sales of products (works, services), and settlements.
The standardization process includes several successive stages.
Working capital rationing process
As an example of the implementation of a normative approach, consider such a concept as standard costs, that is, costs determined in advance to achieve efficient production in relation to a certain type of product. Standard values are usually determined according to product specifications. Standard costs are calculated by summing the standard costs of all operations necessary to produce a product. Based on standard costs, standard calculations and estimates are compiled.
Cost standardization allows you to take into account deviations for each type of product in detail and in a timely manner by cost elements or by costing items in order to develop regulatory actions. Deviations overexpenditures or savings identified by comparing actual costs with standard costs are considered. Comparison of the results obtained with the standards for individual elements (items) of costs makes it possible to assess how a particular unit performed in the reporting period and to identify existing reserves for increasing efficiency.
In rationing practice, stocks are divided into:
1) on sales stocks– designed to ensure uninterrupted supply to consumer organizations. Under sales stock norm means the quantity of finished products in the warehouse and for shipment that is minimally necessary to ensure uninterrupted operation under the regulated conditions of product supply;
2)inventory– support trade organizations for uninterrupted trade;
3)productive reserves(raw materials, materials, components, spare parts, etc.) – designed for an uninterrupted production process during breaks between deliveries. Under production stock norm of any brand of material resource is understood as the amount of resource located in the warehouse, unloading, receiving that is minimally necessary and sufficient to ensure uninterrupted operation under regulated conditions of supply and consumption processes.
In order for an enterprise to carry out economic activities, it must have at its disposal optimal and required amount of working capital. Their role is not exaggerated at all, because they participate in the main stages of production: supply, production and sales.
First stage represents the acquisition of a certain amount of inventory for the company’s funds, second– entry of these stocks into the production cycle and their transformation into finished products, and, finally, final stage is the company's receipt of profit, which partially returns the cost of working capital. All this suggests that working capital represents money invested in means of production.
Since the production process can only be carried out if the required volume of working capital is available, an important component of production planning should be rationing their stock. This will avoid the suspension of the enterprise and make it possible to rationally use funds for the acquisition of current assets.
The process aimed at determining stock norms for groups of working capital is called rationing. There are elements that are more stable, the rationing of which is acceptable and appropriate, but there are also those that change very often and significantly and do not have a direct impact on the production process.
For the latter, standards are not developed at all (for example, funds in settlements, shipped unpaid goods, etc.).
Some elements of working capital have direct impact on the production process. For them, it is necessary to establish the standard that the enterprise needs (for example, production reserves, etc.).
Some companies use an integrated approach when rationing, others standardize only those elements of current assets that are more involved in the production process. But only management is mistaken if it does not set any standards at all when planning production activities.
Today, each enterprise, when planning its activities, develops standards and also chooses a more suitable standardization method, each of which is worth considering in more detail.
Most applicable for a planned economy normative method planning, which implies the presence of certain standards, calculated taking into account predetermined values for the expenditure of material, financial and time resources. The latter, in turn, are determined on the basis of last year’s data or on the basis of technical standards. In simple words, the essence of this method is to establish standards that will subsequently serve to form a system of planned indicators.
Direct counting method involves determining the norm for all elements of working capital. Each standard is determined taking into account the fact that during the functioning of production its organizational and technical level changes.
It is because of these changes that this method is considered basic in the industry. With its help, you can most accurately determine the amount of working capital that the company must have to carry out a continuous production process.
Sometimes, when calculating standards, it is assumed that no changes will occur in the operating conditions of the enterprise during the planning period. This method is usually called analytical. Its main feature is that the calculation of standards is based on an analysis of the efficiency of using funds in the previous period.
When establishing standards, the ratio of the growth rate of production volumes and the size of standardized working capital in the previous period is taken into account. This method is most popular for enterprises whose specific share of production inventories is quite large in relation to the working capital that the company has.
If, when calculating the standard, the indicator of the previous period is taken as a basis and changes in the conditions of the production process are taken into account, then this method is usually called coefficient.
The management of each enterprise independently makes decisions about which method is best to use. When choosing, take into account many factors: the period of existence of the company, its field of activity, its size and capabilities. However, in practice, as a rule, the first two methods are used by enterprises that have been operating for more than a year, which have already managed to develop a production program and establish the production process.
These companies calculate indicators using these methods due to the fact that the staff does not have the required number of qualified economists capable of conducting a more detailed analysis.
As you can see, there are ways to set standards a large number of, but in order to better understand the rationing process, you need to understand how individual indicators and the general standard of working capital are calculated.
Suppose there is an enterprise, JSC Best, which, when planning its activities, calculates standard indicators. Using the example of this organization, we will consider how to do this correctly.
The first indicator is called inventory standard and characterizes the duration of the period during which the product will be in preparatory, current and safety stocks. This indicator is calculated by multiplying the average use of materials during the day and the sum of the norms of preparatory, current and safety stocks.
Np.z. = Qday * (Np.z. * Nt.z. * Nstr.)
Let's assume that the company in question has 20 suppliers interacting with it, and the delivery cycle is 4000 days. The safety stock norm is a tenth of the current stock norm, while the average daily volume of required material is 30 kg, each of which costs 20 rubles. The technological cycle is 5 days
We determine the inventory standard by performing following calculations:
- Material consumption for one day = 30 kg * 20 rubles = 600 rubles.
- Current inventory rate = 4000 / 20 / 2 = 100 days.
- Safety stock norm = 100 * 10% = 10 days.
- Technological stock norm = 5 days.
- Total inventory rate = 100 + 10 + 5 = 115 days.
Thus, the required indicator is 115 * 600 = 69,000 rubles.
The next particular indicator is called work in progress standard, that is, products that are at various stages of processing. This indicator is calculated as follows:
Nn.p. = Vday *Tc. * Kn.z., where
Vday- the amount of products planned to be produced per day, TC.- number of days in the production cycle, Prince— coefficient of increasing costs.
In the example, costs at Best OJSC are distributed unevenly and the following resources are required for production:
Cost increase coefficient (with uneven distribution) = 1000 / 1200 = 0.83.
Work in progress standard = 11,000 * 5 * 0.83 = 45,650 rubles.
Necessary for further calculations is the working capital standard for finished products, that is, the standard for products placed in a warehouse for the purpose of their sale in the future.
This standard is usually calculated by multiplying the average daily output of a product at cost and the stock norm.
Ng.p. = Bday * Nz.g.p.
Considering the company produces three types of products, individual indicators for which are presented in the table:
| Product type | Vut, thousand rub. | Nzgp, days | Ngp, thousand rubles |
|---|---|---|---|
| Total | 218 | ||
| A | 5 | 10 | 50 |
| B | 12 | 8 | 96 |
| C | 6 | 12 | 72 |
The last particular indicator is called standard for deferred expenses, it characterizes the maximum permissible amount of working capital that can be used to finance future expenses.
This standard is calculated using following formula:
Nrbp = P0 + Rpl - Rsp
For the company in question, this indicator will be calculated in accordance with the following table:
| Type or group of expenses | P0, thousand rubles | RPL, thousand rubles | RSP, thousand rubles | Nrbp, thousand rubles. |
|---|---|---|---|---|
| Total | 5000 | 3000 | 800 | 7200 |
| Expenses for the development and implementation of new products | 1000 | 2500 | 700 | 2800 |
| The cost of renting and repairing premises for storing products | 4000 | 500 | 100 | 4400 |
After performing the above calculations, it is calculated general working capital standard, that is, an indicator that characterizes the planned stock of inventory items necessary for the successful and continuous operation of the enterprise and represents the sum of all the private standards that were presented above.
This standard is calculated using the following formulas:
Ntotal = Np.z. + Nn.p. + Ng.p. + Nb.r.
Now, to determine this indicator for the Best company, you need to summarize all the private standards that were found earlier:
N(total) = 69,000 + 45,650 + 218 + 7,200 = 122,068 thousand rubles.
Thus, we can conclude that for the successful and continuous operation of production, the company must have working capital totaling 122,068 thousand rubles.
Rationing of working capital is a very important and labor-intensive process. It is thanks to the establishment of standards that the company can plan rationally production process and not overpay for storage of working capital.
The essence and composition are presented in this video.
To determine the need to calculate your own working capital for an enterprise, it is worth considering some points. For example, these funds must cover not only the basic processes in order to fulfill the production program, but also the needs of housing and communal services, auxiliary, subsidiary and other farms that are not related to the company’s activities and do not have an independent balance sheet, as well as for carrying out major repairs on their own . However, in practice, the need for own working capital is most often determined only for core activities, which somewhat reduces its need.
The volume of own working capital is calculated depending on the following factors:
The calculation form used;
- ;
- conditions of sales and provision of supply and sales;
- range of manufactured goods.
Rationing of working capital is expressed in money. To determine the need for them, an estimate of the costs of producing services and goods for a certain period is included. At the same time, for companies with non-seasonal production, it is advisable to use data from the fourth quarter, because during this period, as a rule, production volumes are slightly higher.
For enterprises whose production is seasonal, it is better to use quarterly data with the smallest volume. This is due to the fact that the seasonal need for additional working capital can be provided through short-term bank loans.
To correctly determine the standard, you need to calculate the average daily costs of the standardized elements in financial equivalent. The average daily consumption of production reserves is calculated using the corresponding item in the cost estimate. Work in progress is calculated depending on the cost of gross output, finished goods - on the basis of the cost of marketable products.
During the period of standardization, aggregate and private standards are formed. The whole process contains several successive stages.
First, you need to determine the reserve rate for each element of the regulated capital. These standards are usually set in reserve days and determine the duration of the period that will be provided by this type of funds. The reserve rate can be set as a percentage or monetary equivalent to a certain base.
Next, it is necessary to calculate the amount of working capital, guided by the data of the reserve norm and the total costs of inventory assets of this type, which is needed to create a standardized stock for each individual type of working capital. This is how private standards are formed. These include the following standards for working capital of reserve production:
Raw materials;
- components;
- basic and additional materials;
- purchased semi-finished product;
- container;
- fuel;
- LBP (low-value and high-wear items).
At the end of all calculations, all partial standards are summed up and the total standard is calculated.
These principles are expressed in the following points:
Systematicity;
- scientific validity;
- planning;
- progressiveness.
Consistency is expressed in the relationship between material standards and the system of technical standards used. Material standards are taken as the basis for technological standards (daily consumption of funds, duration of one production cycle, etc.) and, through established standards, stimulate the improvement of the technological process.
The principle of scientific validity is that the process of rationing working capital takes as a basis the latest methods of production organization of labor and is a means responsible for the implementation of its own reserves.
Planning is determined by the fact that any company must ration capital in accordance with existing forecasts and orders for product sales, as well as planned cost estimates, investment and innovation plans, and so on.
The principle of progressiveness is determined during the period of creation of measures to increase the turnover of funds by reducing material costs and labor costs, accelerated circulation of documentation, increasing the level of organization of material and technical equipment, sales of goods, and so on.
Methods for rationing current assets
As a rule, enterprises use such methods of rationing working capital as:
1) analytical;
2) direct account;
3) coefficient.
The analytical method is used in cases where the planned period does not provide for any significant changes compared to the previous ones. In this case, the standard calculation is made on an aggregate basis, taking into account the ratio of the amount of working capital for past periods and the growth rate of production volumes. During the analysis of the current working capital, its actual reserves must be adjusted, and all unnecessary ones must be eliminated.
The direct accounting method involves calculating reserves for each element of working capital. In this case, all changes in the organizational and technological development of production, as well as the transportation of materials and calculation practices between companies must be taken into account. This method is quite labor-intensive, requiring the highest level of qualifications of economists and the involvement of many different company services (production and economic departments, procurement, accounting). However, it is this technique that makes it possible to most accurately calculate the company’s need for working capital.
The coefficient method allows you to determine a new standard based on the standard of the previous period by including various changes in it. Here the conditions of equipment, production, sales of products, and calculations are taken into account.
There are companies that have been operating for more than one year, which most often use coefficient and analytical methods. They formulate a production program and organize the production process, but do not have the required number of economists with sufficiently high qualifications for a more detailed analysis of the work in the field of calculating working capital.
However, in practice the most commonly used method is the direct counting method. Its main advantage is that the data obtained are the most reliable, since the most accurate calculation of aggregate and private standards is made.
As noted above, working capital rationing is carried out by calculating working capital.
The working capital standard for a certain period is calculated using the analytical method or direct counting and is divided into private (the amount of funds by element) and total (the sum of all working capital) standards.
Using the direct counting method, the standard is calculated as a set of working capital in the form of the sums of each element based on existing orders, reserve and expenditure standards, innovation and investment plans and planned cost calculations. To carry out calculations, the formula is used:
Woc = ∑Wn
where Woc is the total standard of the fixed capital element; n – standard element of fixed capital.
The main advantage of this method is that the total standard is defined as the sum of individual elements. The importance of the analytical method lies in the fact that it is focused on the basic regulatory level and an aggregated calculation of the need for resources based on the planning of the standardized period. The following formula applies here:
Woc = In * Wbos
where In is an index of changes in the volume of products produced or material resources used; bos – the basic normative level.
Thus, the index of changes in the volume of manufactured products or applied material resources is calculated using the following formula:
In = Mpl/Mfact
In = Vpl/Vfact
where Vpl is the estimated quantity of manufactured products; Vfact – actual production of products; Mpl – expected expenditure of funds; Mfact – actual expenditure of funds.
The advantage of this method is that it is quite simply calculated, but it has a drawback in the form of transferred omissions and shortcomings, which are always present when determining the standard in the base period. This method is used primarily for prospective calculations of the need for financial support.
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