Agricultural and Resource Economics (Sep 2019)
Structure of direct and concomitant effect of growth of volumes of commodity production in food enterprises
Abstract
Purpose. The purpose of the study is to justify and to demonstrate, using a specific example, a methodology for calculation the direct and indirect effect from marginal sales growth and on this basis to provide lecturers and students of higher educational institutions, as well as industry specialists, with modern methodological tools. Methodology / approach. During the study, general scientific and special methods were used, namely: abstract-logical method – to justify the methodology for calculating the amount of profit per unit of production; the method of economic comparison – for comparing the basic and calculation options, as well as a graphical method – for identifying the trends in changes of the output sales metrics. Results. The study of the structure of the economic effect caused by the increase in volume of sales output has its own specifics. Implementation of new organizational-and-economic initiatives leads not only to a direct economic impact, but likewise to a significant indirect effect as well. The specifics of calculations of economic efficiency of innovative developments at food processing enterprises are provided. Furthermore, a method of calculating revenue per unit of production and in total across an enterprise, including those achieved due to output volume growth, a decrease in the cost of production and an increase in realised output prices, is presented. It is quite obvious that the revenue per unit of food processing output tends to increase alongside an increase in the total sales volume. However, hereby the following relationship is being identified: marginal revenue due to a decrease in the cost of production typically exceeds the marginal revenue due to an increase in sales revenues accordingly. This relationship is confirmed by a specific example of a beer company. Originality / scientific novelty. The conducted research demonstrated that the efficiency of implementation of innovative developments at industrial enterprises which are directed towards an increase in sales volumes depend not only on marginal output volume, a decrease in the cost of production and an increase in sales prices, but also on an initial state of production expressed via a ratio of fixed costs to variable costs and a resulting level of production profitability accordingly. A higher economic effect is provided by an innovative development which – all else equal – is implemented on enterprises that have a higher share of fixed costs in the total structure and a lower output profitability respectively. The obtained research results are performed by the authors for a first time based on examples of a specific food processing enterprise. Practical value / relevance. The provided method of economic evaluating of the structure of direct and indirect effects of output sales growth at a food processing enterprise can be characterised by the simplicity of implementation, and therefore will be in high demand in educational purposes and in practical production conditions.
