Cost Behavior: Analysis and Use


 Barbara Webster
 2 years ago
 Views:
Transcription
1 Types of Cost Behavior Patterns Cost Behavior: Analysis and Use Chapter Five Recall the summary of our cost behavior discussion from an earlier chapter. Summary of Variable and Fixed Cost Behavior Cost In Total Per Unit Variable Total variable cost is Variable cost per unit remains proportional to the activity the same over wide ranges level within the of activity. Total fixed cost remains the same even when the activity Fixed cost per unit goes Fixed level changes within the down as activity level goes up. The Activity Base True Variable Cost Example produced Miles driven A measure of what causes the incurrence of a variable cost hours hours A variable cost is a cost whose total dollar amount varies in direct proportion to changes in the activity level. our total long distance telephone bill is based on how many minutes you talk. Total Long Distance Telephone Bill Minutes Talked Types of Cost Behavior Patterns Recall the summary of our cost behavior discussion from an earlier chapter. Summary of Variable and Fixed Cost Behavior Cost In Total Per Unit Variable Total variable cost is Variable cost per unit remains proportional to the activity the same over wide ranges level within the of activity. Total fixed cost remains the same even when the activity Fixed cost per unit goes Fixed level changes within the down as activity level goes up. Variable Cost Per Unit Example A variable cost remains constant if expressed on a per unit basis. The cost per minute talked is constant. For example, 1 cents per minute. Per Minute Telephone Charge Minutes Talked
2 Extent of Variable Costs The proportion of variable costs differs across organizations. For example... A public utility with large investments in equipment will tend to have variable costs. A service company will normally have a high proportion of variable costs. A manufacturing company will often have variable costs. A merchandising company usually will have a high proportion of variable costs like cost of sales. Examples of Variable Costs 1. Merchandising companies cost of goods sold. 2. Manufacturing companies direct materials, direct labor, and variable overhead. 3. Merchandising and manufacturing companies commissions, shipping costs, and clerical costs such as invoicing. 4. Service companies supplies, travel, and clerical. True Variable Cost StepVariable Costs Direct materials is a true or proportionately variable cost because the amount used during a period will vary in direct proportion to the level of production activity. A resource that is obtainable only in large chunks (such as maintenance workers) and whose costs increase or decrease only in response to fairly wide changes in activity is known as a stepvariable cost. Cost Cost Volume Volume StepVariable Costs StepVariable Costs Small changes in the level of production are not likely to have any effect on the number of maintenance workers employed. Only fairly wide changes in the activity level will cause a change in the number of maintenance workers employed Cost Cost Volume Volume
3 The Linearity Assumption and the Relevant Range Types of Cost Behavior Patterns Total Cost Relevant Range Activity Economist s Curvilinear Cost Function A straight line closely approximates a curvilinear variable cost line within the Accountant s StraightLine Approximation (constant unit variable cost) Let s look at fixed cost behavior on the next screens. Summary of Variable and Fixed Cost Behavior Cost In Total Per Unit Variable Total variable cost is Variable cost per unit remains proportional to the activity the same over wide ranges level within the of activity. Total fixed cost remains the same even when the activity Fixed cost per unit goes Fixed level changes within the down as activity level goes up. Total Fixed Cost Example Types of Cost Behavior Patterns A fixed cost is a cost whose total dollar amount remains constant as the activity level changes. our monthly basic telephone bill is probably fixed and does not change when you make more local calls. Monthly Basic Telephone Bill Number of Local Calls Recall the summary of our cost behavior discussion from an earlier chapter. Summary of Variable and Fixed Cost Behavior Cost In Total Per Unit Variable Total variable cost is Variable cost per unit remains proportional to the activity the same over wide ranges level within the of activity. Total fixed cost remains the same even when the activity Fixed cost per unit goes Fixed level changes within the down as activity level goes up. Fixed Cost Per Unit Example Types of Fixed Costs Average fixed costs per unit decrease as the activity level increases. The fixed cost per local call decreases as more local calls are made. Monthly Basic Telephone Bill per Local Call Number of Local Calls Committed Longterm, cannot be significantly reduced in the short term. Examples Discretionary May be altered in the shortterm by current managerial decisions Examples
4 The Trend Toward Fixed Costs Is Labor a Variable or a Fixed Cost? The trend in many industries is toward relative to variable costs. As machines take over many mundane tasks previously performed by humans, knowledge workers are demanded for their minds rather than their muscles Knowledge workers tend to be salaried, highlytrained and difficult to replace. The cost to compensate these valued employees is relatively fixed rather than variable. The behavior of wage and salary costs can differ across countries, depending on labor regulations, labor contracts, and custom. In France, Germany, China, and Japan management has little flexibility in adjusting the size of the labor force. Labor costs are more fixed in nature. In the United States and the United Kingdom management has greater latitude. Labor costs are more variable in nature. Fixed Costs and Relevant Range Fixed Costs and Relevant Range Rent Cost in Thousands of Dollars 9 Total cost doesn t Relevant change for a wide 6 Range range of activity, and then jumps to a new higher cost for 3 the next higher range of activity. 1, 2, 3, Rented Area (Square Feet) The relevant range of activity for a fixed cost is the range of activity over which the graph of the cost is flat. Example: Office space is available at a rental rate of $3, per year in increments of 1, square feet. As the business grows more space is rented, increasing the total cost. Fixed Costs and Relevant Range Quick Check How does this type of fixed cost differ from a stepvariable cost? Stepvariable costs can be adjusted more quickly and... The width of the activity steps is much wider for the fixed cost. Which of the following statements about cost behavior are true? 1. Fixed costs per unit vary with the level of activity. 2. Variable costs per unit are constant within the 3. Total fixed costs are constant within the 4. Total variable costs are constant within the
5 Mixed Costs Mixed Costs Total Utility Cost A mixed cost has both fixed and variable components. Consider the example of utility cost. Total mixed cost Activity (Kilowatt Hours) Variable Cost per KW Fixed Monthly Utility Charge Total Utility Cost Total mixed cost Activity (Kilowatt Hours) The The total total mixed mixed cost cost line line can can be be expressed as as an an equation: equation: = a + b b Where: Where: = the the total total mixed mixed cost cost a = the the total total fixed fixed cost cost (the (the vertical vertical intercept intercept of of the the line) line) b = the the variable variable cost cost per per unit unit of of activity activity (the (the slope slope of of the the line) line) = the the level level of of activity activity Variable Cost per KW Fixed Monthly Utility Charge Mixed Costs Example Analysis of Mixed Costs If your fixed monthly utility charge is $4, your variable cost is $.3 per kilowatt hour, and your monthly activity level is 2, kilowatt hours, what is the amount of your utility bill? = a + b = $4 + ($.3 2,) = $ Account Analysis and the Engineering Approach Each account is classified as either variable or fixed based on the analyst s knowledge of how the account behaves. Cost estimates are based on an evaluation of production methods, and material, labor and overhead requirements. The Scattergraph Method The Scattergraph Method Maintenance Cost 1, s of Dollars 2 1 Plot the data points on a graph (total cost vs. activity) Patientdays in 1, s Maintenance Cost 1, s of Dollars Draw a line through the data points with about an equal numbers of points above and below the line Patientdays in 1, s
6 The Scattergraph Method The HighLow Method Maintenance Cost 1, s of Dollars Use one data point to estimate the total level of activity and the total cost. Total maintenance cost = $11, 2 1 Intercept = Fixed cost: $1, Patientdays in 1, s Patient days = 8 Assume the following hours of maintenance work and the total maintenance costs for six months. The HighLow Method The HighLow Method The variable cost per hour of maintenance is equal to the change in cost divided by the change in hours. $2,4 3 = $8./hour Total Fixed Cost = Total Cost Total Variable Cost Total Fixed Cost = $9,8 ($8/hour 8 hours) Total Fixed Cost = $9,8 $6,4 Total Fixed Cost = $3,4 The HighLow Method Quick Check The Cost Equation for Maintenance = $3,4 + $8. Sales salaries and commissions are $1, when 8, units are sold, and $14, when 12, units are sold. Using the highlow method, what is the variable portion of sales salaries and commission? a. $.8 per unit b. $.1 per unit c. $.12 per unit d. $.125 per unit
7 Quick Check LeastSquares Regression Method Sales salaries and commissions are $1, when 8, units are sold, and $14, when 12, units are sold. Using the highlow method, what is the fixed portion of sales salaries and commissions? a. $ 2, b. $ 4, c. $1, d. $12, A method used to analyze mixed costs if a scattergraph plot reveals an approximately linear relationship between the and variables. This method uses all of the data points to estimate the fixed and variable cost components of a mixed cost. The goal of this method is to fit a straight line to the data that minimizes the sum of the squared errors. LeastSquares Regression Method LeastSquares Regression Method Software can be used to fit a regression line through the data points. The cost analysis objective is the same: = a + b Leastsquares regression also provides a statistic, called the R 2, that is a measure of the goodness of fit of the regression line to the data points. R 2 is the percentage of the variation in total cost explained by the activity. Total Cost 2 1 R 2 varies from % to 1%, and the higher the percentage the better Activity Comparing Results From the Three Methods The three methods just discussed provide slightly different estimates of the fixed and variable cost components of the mixed cost. This is to be expected because each method uses differing amounts of the data points to provide estimates. Leastsquares regression provides the most accurate estimate because it uses all the data points. Let s put our knowledge of cost behavior to work by preparing a contribution format income statement.
8 The Contribution Format Uses of the Contribution Format Total Unit Sales Revenue $ 1, $ 5 Less: Variable costs 6, 3 Contribution margin $ 4, $ 2 Less: Fixed costs 3, Net operating income $ 1, The contribution margin format emphasizes cost behavior. Contribution margin covers fixed costs and provides for income. The contribution income statement format is used as an internal planning and decision making tool. We will use this approach for: 1. Costvolumeprofit analysis (Chapter 6). 2. Budgeting (Chapter 9). 3. Segmented reporting of profit data (Chapter 12). 4. Special decisions such as pricing and makeorbuy analysis (Chapter 13). The Contribution Format Comparison of the Contribution Income Statement with the Traditional Income Statement Traditional Approach (costs organized by function) Contribution Approach (costs organized by behavior) Sales $ 1, Sales $ 1, Less cost of goods sold 7, Less variable expenses 6, Gross margin $ 3, Contribution margin $ 4, Less operating expenses 2, Less fixed expenses 3, Net operating income $ 1, Net operating income $ 1, Used primarily for external reporting. Used primarily by management.
Cost Behavior and. Types of Cost Behavior Patterns. Summary of VC and FC Behavior. Cost In Total Per Unit
Cost Behavior and Cost Estimation 1 Types of Cost Behavior Patterns Summary of VC and FC Behavior Cost In Total Per Unit Total VC is VC per unit remains VC proportional to the activity the same over wide
More informationPart Three. Cost Behavior Analysis
Part Three Cost Behavior Analysis Cost Behavior Cost behavior is the manner in which a cost changes as some related activity changes An understanding of cost behavior is necessary to plan and control costs
More informationAGENDA: MANAGERIAL ACCOUNTING AND COST CONCEPTS
TM 21 A. Cost classifications for: AGENDA: MANAGERIAL ACCOUNTING AND COST CONCEPTS 1. Financial statement preparation. 2. Predicting cost behavior. 3. Assigning costs to cost objects. 4. Making decisions
More informationMANAGERIAL ACCOUNTING
MANAGERIAL ACCOUNTING Table of Contents TABLE OF CONTENTS 1 MANAGERIAL ACCOUNTING AND COST CONCEPTS 6 MANUFACTURING COSTS 6 PRODUCT COSTS VS PERIOD COSTS 6 COST CLASSIFICATIONS FOR PREDICTING COST BEHAVIOR
More informationChapter 25 CostVolumeProfit Analysis Questions
Chapter 25 CostVolumeProfit Analysis Questions 1. Costvolumeprofit analysis is used to accomplish the first step in the planning phase for a business, which involves predicting the volume of activity,
More informationCost Behavior and CostVolumeProfit Analysis QUESTIONS
Chapter 18 Cost Behavior and CostVolumeProfit Analysis QUESTIONS 1. A variable cost is one that varies proportionately with the volume of activity. For example, direct materials and direct labor (when
More informationManagerial accounting
Managerial accounting Concept of Cost COST definition and classifications In general, cost means the amount of expenditure (actual or notional) incurred on, or attributable to a given thing. However, the
More informationy = a + bx Chapter 10: Horngren 13e The Dependent Variable: The cost that is being predicted The Independent Variable: The cost driver
Chapter 10: Dt Determining ii How Costs Behave Bh Horngren 13e 1 The Linear Cost Function y = a + bx The Dependent Variable: The cost that is being predicted The Independent Variable: The cost driver The
More informationCHAPTER LEARNING OBJECTIVES. Identify common cost behavior patterns.
c04.qxd 6/2/06 2:53 PM Page 124 CHAPTER 4 LEARNING OBJECTIVES 1 2 3 4 5 6 Identify common cost behavior patterns. Estimate the relation between cost and activity using account analysis and the highlow
More informationCHAPTER 22 COSTVOLUMEPROFIT ANALYSIS
CHAPTER 22 COSTVOLUMEPROFIT ANALYSIS Related Assignment Materials Student Learning Objectives Conceptual objectives: C1. Describe different types of cost behavior in relation to production and sales
More informationC 5  COST BEHAVIOR: ANALYSIS AND USE notesc5.doc Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM
C 5  COST BEHAVIOR: ANALYSIS AND USE notesc5.doc CHAPTER LEARNING OBJECTIVES: MAJOR:  Use the HighLow method to determine and calculate the structure of a cost.  Define, explain and use variable,
More informationQWhat Does CHAPTER. Managerial Accounting and CostVolumeProfit Relationships. It Mean?
12 CHAPTER Managerial Accounting and CostVolumeProfit When asked by a marketing or production manager what a certain item or activity costs, the management accountant who asks Why do you want to know?
More informationHelena Company reports the following total costs at two levels of production.
Chapter 22 Helena Company reports the following total costs at two levels of production. 10,000 Units 20,000 Units Direct materials $20,000 $40,000 Maintenance 8,000 10,000 Direct labor 17,000 34,000 Indirect
More informationManagement Accounting Fundamentals
Management Accounting Fundamentals Module 4 Cost behaviour and costvolumeprofit analysis Lectures and handouts by: Shirley Mauger, HB Comm, CGA Part 1 2 3 Module 4  Table of Contents Content 4.1 Variable
More informationCOSTVOLUMEPROFIT RELATIONSHIPS
TM 51 COSTVOLUMEPROFIT RELATIONSHIPS Costvolumeprofit (CVP) analysis is concerned with the effects on net operating income of: Selling prices. Sales volume. Unit variable costs. Total fixed costs.
More informationCHAPTER 22. CostVolumeProfit Relationships ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief
CHAPTER 22 CostVolumeProfit Relationships ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems * 1. Distinguish between variable and fixed costs.
More informationAccounting Building Business Skills. Learning Objectives: Learning Objectives: Paul D. Kimmel. Chapter Fourteen: Costvolumeprofit Relationships
Accounting Building Business Skills Paul D. Kimmel Chapter Fourteen: Costvolumeprofit Relationships PowerPoint presentation by Kate WynnWilliams University of Otago, Dunedin 2003 John Wiley & Sons Australia,
More informationChapter 2 Solutions. Solution 2.1
Chapter 2 Solutions Solution 2.1 a) Explain what you understand by the term 'cost' The term cost can be defined as 'the resources consumed or used up to achieve a certain objective'. This objective may
More informationManagement Accounting Theory of Cost Behavior
Management Accounting 63 Management Accounting Theory of Cost Behavior Management accounting contains a number of decision making tools that require the conversion of all operating costs and expenses into
More informationYou and your friends head out to a favorite restaurant
19 CostVolumeProfit Analysis Learning Objectives 1 Identify how changes in volume affect costs 2 Use CVP analysis to compute breakeven points 3 Use CVP analysis for profit planning, and graph the CVP
More informationACC 121 PRINCIPLES OF MANAGERIAL ACCOUNTING
PRINCIPLES OF MANAGERIAL ACCOUNTING COURSE DESCRIPTION: Prerequisites: ACC 120 Corequisites: None This course includes a greater emphasis on managerial and cost accounting skills. Emphasis is on managerial
More informationMANAGERIAL ACCOUNTING 7e Al L. Hartgraves Wayne J. Morse
MANAGERIAL ACCOUNTING 7e Al L. Hartgraves Wayne J. Morse Learning Objective 1 CHAPTER 3 Cost Volume Profit Analysis and Planning Identify the uses and limitations of traditional cost volume profit analysis.
More informationModule 4: Cost behaviour and costvolumeprofit analysis
Page 1 of 28 Module 4: Cost behaviour and costvolumeprofit analysis Required reading Chapter 5, pages 187213 Chapter 6, pages 230253 Appendix 6A, pages 256258 Overview The way in which a cost responds
More informationChapter. CostVolumeProfit Relationships
Chapter 6 CostVolumeProfit Relationships 62 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain how changes in activity affect contribution margin. 2. Compute the contribution
More informationCustodial Guest Days
Exercise 57 (30 minutes) 1. Custodial Guest Days Supplies High activity level (July)... 12,000 $13,500 Low activity level (March)... 4,000 7,500 Change... 8,000 $ 6,000 Variable cost element: Change
More informationThe Contribution Format
CVP Analysis 1 Uses of the Contribution o Format The contribution tib ti income statement t tf format ti is used as an internal planning and decision making tool. This approach is useful for: 1. Costvolumeprofit
More informationCHAPTER 3: ANALYSIS OF COST VOLUME AND PRICING TO INCREASE PROFITABILITY  CVP ANALYSIS Pearson Education. All rights reserved.
CHAPTER 3: ANALYSIS OF COST VOLUME AND PRICING TO INCREASE PROFITABILITY  CVP ANALYSIS Learning Objectives 1. Explain the features of costvolumeprofit (CVP) analysis 2. Determine the breakeven point
More informationCost Accounting ACCT 362/562. Basic Cost Behavior. Why knowing about cost behavior is important
Cost Accounting ACCT 362/562 Basic Cost Behavior Cost behavior is a very important topic in cost and managerial accounting. What we are talking about is the amount spent in relation to some measure of
More informationAssumptions of CVP Analysis. Objective 1: Contribution Margin Income Statement. Assumptions of CVP Analysis. Contribution Margin Example
Assumptions of CVP Analysis CostVolumeProfit Analysis Expenses can be classified as either variable or fixed. CVP relationships are linear over a wide range of production and sales. Sales prices, unit
More informationMBP1133 Managerial Accounting Prepared by Dr Khairul Anuar
1 MBP1133 Managerial Accounting Prepared by Dr Khairul Anuar L5&6 CostVolumeProfit Relationships www.notes638.wordpress.com 2 Key Assumptions of CVP Analysis 1. Selling price is constant. 2. Costs are
More informationChapter 6. Chapter 61. Basics of CostVolumeProfit Analysis. Basics of CostVolumeProfit Analysis. CostVolumeProfit Relationships
Chapter 61 Chapter 6 CostVolumeProfit Relationships McGrawHill /Irwin The McGrawHill Companies, Inc., 2007 Basics of CostVolumeProfit Analysis Contribution Margin (CM) is the amount remaining from
More informationCMA Part 2 Financial Decision Making
CMA Part 2 Financial Decision Making Study Unit 8  CVP Analysis and Marginal Analysis Jim Clemons, CMA Ronald Schmidt, CMA, CFM SU 8.1 CostVolumeProfit (CVP) Analysis  Theory CVP = Breakeven analysis
More informationIn this chapter, you will learn to use costvolumeprofit analysis.
2.0 Chapter Introduction In this chapter, you will learn to use costvolumeprofit analysis. Assumptions. When you acquire supplies or services, you normally expect to pay a smaller price per unit as the
More informationPrepare, Apply, and Confirm
Prepare, Apply, and Confirm etext Features Keep students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material through authorcreated solutions
More informationCHAPTER 10 InClass QUIZ
CHAPTER 10 InClass QUIZ 1. A mixed cost function has a constant component of $20,000. If the total cost is $60,000 and the independent variable has the value 200, what is the value of the slope coefficient?
More informationChapter 6 CostVolumeProfit Relationships
Uploaded By Qasim Mughal http://worldbestfree.blogspot.com/ Chapter 6 CostVolumeProfit Relationships Solutions to Questions 61 The contribution margin (CM) ratio is the ratio of the total contribution
More informationApplications of Linear Equations. Chapter 5
52 Applications of Linear Equations Chapter 5 53 After completing this chapter, you will be able to: > Solve two linear equations in two variables > Solve problems that require setting up two linear
More informationThird Edition. anageria UNTING. STACEY WHITECOTTON Arizona State University. ROBERT LIBBY Cornell University. FRED PHILLIPS University of Saskatchewan
Third Edition anageria UNTING STACEY WHITECOTTON Arizona State University ROBERT LIBBY Cornell University FRED PHILLIPS University of Saskatchewan CONTENTS CHARTER 1 Introduction to Managerial Accounting
More informationFinancial Statements for Manufacturing Businesses
Management Accounting 31 Financial Statements for Manufacturing Businesses Importance of Financial Statements Accounting plays a critical role in decisionmaking. Accounting provides the financial framework
More informationRay H. Garrison, Eric W. Noreen, Peter C. Brewer Managerial accounting
Ray H. Garrison, Eric W. Noreen, Peter C. Brewer Managerial accounting Chapter One Managerial Accounting: An Overview 1 Chapter Two Managerial Accounting and Cost Concepts 24 Chapter Three JobOrder Costing
More informationSolutions to Homework Problems for Basic Cost Behavior by David Albrecht
Solutions to Homework Problems for Basic Cost Behavior by David Albrecht Solution to Problem #11 This problem focuses on being able to work with both total cost and average per unit cost. As a brief review,
More informationChapter 3: CostVolumeProfit Analysis and Planning
Chapter 3: CostVolumeProfit Analysis and Planning Agenda Direct Materials, Direct Labor, and Overhead Traditional vs. Contribution Margin Income Statements CostVolumeProfit (CVP) Analysis Profit Planning
More informationFinancial Analysis, Modeling, and Forecasting Techniques. Course #5710B/QAS5710B Course Material
Financial Analysis, Modeling, and Forecasting Techniques Course #5710B/QAS5710B Course Material TECHNIQUES OF FINANCIAL ANALYSIS, MODELING, AND FORECASTING Delta Publishing Company Copyright 2011 by DELTA
More informationManagement Accounting 243 Pricing Decision Analysis
Management Accounting 243 Pricing Decision Analysis The setting of a price for a product is one of the most important decisions and certainly one of the more complex. A change in price not only directly
More information2. A direct cost is a cost that cannot be easily traced to the particular cost object under
Chapter 02 Managerial Accounting and Cost Concepts True / False Questions 1. Selling costs can be either direct or indirect costs. True False 2. A direct cost is a cost that cannot be easily traced to
More informationChapter 6: BreakEven & CVP Analysis
HOSP 1107 (Business Math) Learning Centre Chapter 6: BreakEven & CVP Analysis One of the main concerns in running a business is achieving a desired level of profitability. Costvolume profit analysis
More informationPart II Management Accounting DecisionMaking Tools
Part II Management Accounting DecisionMaking Tools Chapter 7 Chapter 8 Chapter 9 CostVolumeProfit Analysis Comprehensive Business Budgeting Incremental Analysis and Decisionmaking Costs Chapter 10
More informationChapter 4. Accounting for Factory Overhead
Chapter 4 Accounting for Factory Overhead Learning Objectives LO1 Identify cost behavior patterns. LO2 Separate semivariable costs into variable and fixed components. LO3 Prepare a budget for factory overhead
More informationChapter 6 CostVolumeProfit Relationships
Chapter 6 CostVolumeProfit Relationships Solutions to Questions 61 The contribution margin (CM) ratio is the ratio of the total contribution margin to total sales revenue. It can be used in a variety
More informationCost Concepts and Behavior
Chapter 2 Cost Concepts and Behavior McGrawHill/Irwin Copyright 2011 by The McGrawHill Companies, Inc. All rights reserved. Learning Objectives L.O. 1 Explain the basic concept of cost. L.O. 2 Explain
More informationWhat is a cost? What is an expense?
What is a cost? What is an expense? A cost is a sacrifice of resources. An expense is a cost incurred in the process of generating revenues. Expenses are recorded at the same time that the associated revenues
More information1 USING REGRESSION TO CALCULATE FIXED COST, CALCULATE THE VARIABLE RATE, CONSTRUCT A COST FORMULA AND DETERMINE BUDGETED COST
ESERCIZI 1 USING REGRESSION TO CALCULATE FIXED COST, CALCULATE THE VARIABLE RATE, CONSTRUCT A COST FORMULA AND DETERMINE BUDGETED COST Refer to the Pizza Vesuvio company information in Cornerstone Exercise
More informationGeorgia Online Formative Assessment Resource (GOFAR) 8th Grade Data Analysis and Probability
8th Grade Data Analysis and Probability Name: Date: Copyright 2014 by Georgia Department of Education. Items shall not be used in a third party system or displayed publicly. Page: (1 of 7 ) 1. Plainview
More informationMc Graw Hill Education
Managerial Accounting for Managers F o u r t h Edition Eric W. Noreen, Ph.D., CMA Professor Emeritus University of Washington Peter C. Brewer, Ph.D. Wake Forest University Ray H. Garrison, D.B.A., CPA
More informationMath 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price
Math 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price Cost functions model the cost of producing goods or providing services. Examples: rent, utilities, insurance,
More informationCHAPTER 3 COSTVOLUMEPROFIT ANALYSIS
CHAPTER 3 COSTVOLUMEPROFIT ANALYSIS NOTATION USED IN CHAPTER 3 SOLUTIONS SP: Selling price VCU: Variable cost per unit CMU: Contribution margin per unit FC: Fixed costs TOI: Target operating income 31
More informationAccounting 2910, Summer 2002 Practice Exam 4. 1. The cost of materials entering directly into the manufacturing process is classified as:
Accounting 2910, Summer 2002 Practice Exam 4 1. The cost of materials entering directly into the manufacturing process is classified as: a. direct labor cost b. factory overhead cost c. burden cost d.
More informationCostVolumeProfit. Managerial Accounting Fifth Edition Weygandt Kimmel Kieso. Page 52
51 CostVolumeProfit Managerial Accounting Fifth Edition Weygandt Kimmel Kieso 52 study objectives 1. Distinguish between variable and fixed costs. 2. Explain the significance of the relevant range.
More informationAP Microeconomics Chapter 12 Outline
I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.
More informationStudy Unit 8. CVP Analysis and Marginal Analysis
Study Unit 8 CVP Analysis and Marginal Analysis SU 8.1 CostVolumeProfit (CVP) Analysis  Theory CVP = Breakeven analysis Allows us to analyze the relationship between revenue and fixed and variable
More informationHouse Published on www.jpsdir.com
I. Cost  Volume  Profit (Break  Even) Analysis A. Definitions 1. Cost  Volume  Profit (CVP) Analysis: is a means of predicting the relationships among revenues, variable costs, and fixed costs at
More informationCostVolumeProfit Relationships
CostVolumeProfit Relationships Chapter 5 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright
More informationPart III: Tools to Analyze Financial Operations
Part III: Tools to Analyze Financial Operations CHAPTER 7: COST BEHAVIOR AND BREAKEVEN ANALYSIS Fixed, Variable and Semivariable Costs Distinguishing between fixed, variable and semivariable costs is
More information12/31/2016. PSY 512: Advanced Statistics for Psychological and Behavioral Research 2
PSY 512: Advanced Statistics for Psychological and Behavioral Research 2 Understand linear regression with a single predictor Understand how we assess the fit of a regression model Total Sum of Squares
More informationModule 12 : Cost Volume Profit Analysis. Lecture 1 : Cost Volume Profit Analysis
Module 12 : Cost Volume Profit Analysis Lecture 1 : Cost Volume Profit Analysis Objectives In this lecture you will learn the following Cost Volume Profit (CVP) Introduction. Fixed costs. Variable costs.
More informationThe following purposes are served by analysis of costvolumeprofit relationship : i. To forecast profit fairly accurately. ii. iii. iv.
1. CVP analysis and purposes: Profit per unit of a product depends on its selling price and cost of sales. Total profit depends on sales volume which in turn depends inter alia on selling price. By and
More informationLesson FA xx. CostVolumeProfit Analysis
Lesson FA20050xx CostVolumeProfit Analysis This workbook contains notes and worksheets to accompany the corresponding video lesson available online at: Permission is granted for educators and students
More informationCosts. Chapter 7 CHAPTER SUMMARY
Chapter 7 Costs CHAPTER SUMMARY Conventional accounting statements do not always provide all the information on costs necessary for effective business decisions. Managers should use the principles presented
More informationntroductiorito MANAGERIAL ACCOUNTING McGrawHill Irwin Professor Miami University Professor Emeritus, Brigham Young University
ntroductiorito MANAGERIAL ACCOUNTING N Professor Miami University Professor Emeritus, Brigham Young University Professor Emeritus, University of Washington McGrawHill Irwin CONTENTS PROLOGUE Managerial
More informationCostVolumeProfit Analysis:
4 CostVolumeProfit Analysis: A Managerial Planning Tool After studying Chapter 4, you should be able to: 1 Determine the breakeven point in number of units and in total sales dollars. 2 Determine the
More informationChapter 22: CostVolumeProfit
Chapter 22: CostVolumeProfit DO IT! 1 Types of Costs Helena Company reports the following total costs at two levels of production. 10,000 Units 20,000 Units Direct materials $20,000 $40,000 Maintenance
More informationand operating income as changes occur in the units sold, selling price, variable cost per unit, or fixed costs of a product.
CHAPTER 3 COSTVOLUMEPROFIT ANALYSIS NOTATION USED IN CHAPTER 3 SOLUTIONS SP: Selling price VCU: Variable cost per unit CMU: Contribution margin per unit FC: Fixed costs TOI: Target operating income 1
More informationCHAPTER 1 Linear Equations
CHAPTER 1 Linear Equations 1.1. Lines The rectangular coordinate system is also called the Cartesian plane. It is formed by two real number lines, the horizontal axis or xaxis, and the vertical axis or
More informationExercise 171 (15 minutes)
Exercise 171 (15 minutes) 1. 2002 2001 Sales... 100.0% 100.0 % Less cost of goods sold... 63.2 60.0 Gross margin... 36.8 40.0 Selling expenses... 18.0 17.5 Administrative expenses... 13.6 14.6 Total expenses...
More informationSales 8,000 16,000 Production costs: Variable 3,200 6,400 Foxed 1,600 1,600 Sales and distribution costs: Variable 1,600 3,200 Fixed 2,400 2,400
Marginal Costing and absorption Costing Compared 29feb2012 Marginal Costing as a cost accounting system is significantly different from absorption costing. It is an alternative method of accounting for
More informationManagerial Accounting. 2011 First semester Takayuki Asada
Managerial Accounting 2011 First semester Takayuki Asada 1 Chapter4 CostVolumeProfit Analysis After reading this chapter, you will be able to: Identify common cost behavior patterns. Estimate the relation
More informationMath 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price
Math 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price Cost functions model the cost of producing goods or providing services. Examples: rent, utilities, insurance,
More informationCosts and Decision Making
139 Part 2 Costs and Decision Making Chapter 5 Chapter 6 Chapter 7 Chapter 8 Cost Behavior and Relevant Costs CostVolumeProfit Analysis and Variable Costing ShortTerm Tactical Decision Making LongTerm
More informationCHAPTER 7 THE COST OF PRODUCTION
CHAPTER 7 THE COST OF PRODUCTION EXERCISES 1. Assume a computer firm s marginal costs of production are constant at $1,000 per computer. However, the fixed costs of production are equal to $10,000. a.
More informationHow to Forecast Your Revenue and Sales A Step by Step Guide to Revenue and Sales Forecasting in a Small Business
How to Forecast Your Revenue and Sales A Step by Step Guide to Revenue and Sales Forecasting in a Small Business By BizMove Management Training Institute Other free books by BizMove that may interest you:
More informationCMA311S NOTES UNIT 1: COSTVOLUMEPROFIT ANALYSIS
CMA311S NOTES 2010. UNIT 1: COSTVOLUMEPROFIT ANALYSIS Example 1: Tokio Ltd manufactures and sells only one product. The product is sold at N$10 per unit. Other details are as follows: Variable cost per
More informationUNIT2: Session 13 : Cost analysis for planning and decision making :
UNIT2: Session 13 : Cost analysis for planning and decision making : * Cost classification and approach : A Marginal costing :  variable and fixed.  Variable cost is charged to the product unit.
More information21. Costvolumeprofit analysis
This book is licensed under a Creative Commons Attribution 3.0 License 21. Costvolumeprofit analysis Learning objectives After studying this chapter, you should be able to: Explain and describe cost
More informationCostVolumeProfit Analysis
CostVolumeProfit Analysis Costvolumeprofit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there
More informationCost Behaviour. Concepts and definitions questions. 1.1 Distinguish between
1 ost ehaviour ost ehaviour 1 oncepts and definitions questions 1.1 istinguish between (iii) Financial accounting ost accounting Management accounting 1.2 State six different benefits of cost accounting.
More informationRelationship of two variables
Relationship of two variables A correlation exists between two variables when the values of one are somehow associated with the values of the other in some way. Scatter Plot (or Scatter Diagram) A plot
More informationAccounting Crash course. Year:
Accounting Crash course Year: 20152016 1 Crash Course Accounting concepts 2 Understand the difference Financial Accounting Management Accounting External Obligatory For Stakeholders Limited data Internal
More informationRelevant Costs for Decision Making
Cost Concepts for Decision Making Relevant Costs for Decision Making A relevant cost is a cost that differs between alternatives. Chapter Thirteen 1 2 An avoidable cost can be eliminated (in whole or in
More informationPrinciples of Managerial Accounting ACC102TE. TECEP Test Description
Principles of Managerial Accounting ACC102TE This TECEP tests the material usually taught in a onesemester course in managerial accounting. It focuses on the information that managers need to make decisions
More informationLECTURES 1516: INPUT DEMAND ANSWERS AND SOLUTIONS. True/False Questions
LECTURES 1516: INPUT DEMAND ANSWERS AND SOLUTIONS True/False Questions True_ Consider two firms, X and Y, that have the same cost function,, for a given set of input prices. The production function of
More informationChapter3D CVP ANALYSIS AND OPERATING LEVERAGE. BSNL, India For Internal Circulation Only 1
Chapter3D CVP ANALYSIS AND OPERATING LEVERAGE BSNL, India For Internal Circulation Only 1 CVP ANALYSIS AND OPERATING LEVERAGE Introduction: Cost Volume Profit analysis is a study of the interrelationship
More informationSELFTEST: SIMPLE REGRESSION
ECO 22000 McRAE SELFTEST: SIMPLE REGRESSION Note: Those questions indicated with an (N) are unlikely to appear in this form on an inclass examination, but you should be able to describe the procedures
More informationExam 1 Chapters 13 Key
Exam 1 Chapters 13 Key 1. Which of the following should NOT be included as part of manufacturing overhead at a company that makes office furniture? A. Sheet steel in a file cabinet made by the company.
More informationManagement Accounting and DecisionMaking
Management Accounting 15 Management Accounting and DecisionMaking Management accounting writers tend to present management accounting as a loosely connected set of decision making tools. Although the
More information01 In any business, or, indeed, in life in general, hindsight is a beautiful thing. If only we could look into a
01 technical costvolumeprofit relevant to acca qualification paper F5 In any business, or, indeed, in life in general, hindsight is a beautiful thing. If only we could look into a crystal ball and find
More informationBreakeven In Four Easy Steps How To Calculate Your Breakeven On Labor (Short Form)
Step 2: Lost Days: Breakeven In Four Easy Steps How To Calculate Your Breakeven On Labor (Short Form) Calculation for Department: Why This Worksheet Most HVAC, plumbing, electrical, and related companies
More informationThe term marginal cost refers to the additional costs incurred in providing a unit of
Chapter 4 Solutions Question 4.1 A) Explain the following The term marginal cost refers to the additional costs incurred in providing a unit of product or service. The term contribution refers to the amount
More informationAnalyzing Relevant Benefits & Costs
Cost Accounting Acct 362/562 Analyzing Relevant Benefits & Costs Making good decisions is important to managers as they guide their organization. Sometimes the decision is based on both qualitative (nonfinancial)
More informationMODULE 70: THE MARKETS FOR
MODULE 70: THE MARKETS FOR LAND & CAPITAL SCHMIDTY SCHOOL OF ECONOMICS THE PURPOSE OF THIS MODULE IS TO SHOW HOW WE CAN USE SUPPLY AND DEMAND TO MODEL THE MARKETS FOR THE LAND AND CAPITAL INPUTS. Learning
More information530. (25 min.) Methods of Estimating Costs HighLow: Adriana Corporation. a. Highlow estimate
530. (25 min.) Methods of Estimating Costs HighLow: Adriana Corporation. a. Highlow estimate Machine Hours Overhead Costs Highest activity (month 12)... 8,020 $564,210 Lowest activity (month 11)...
More information