Submit Search
Upload
Cost Behavior Analysis
•
Download as PPT, PDF
•
22 likes
•
19,683 views
JhOnie JhOan
Follow
Managerial Accounting
Read less
Read more
Education
Business
Technology
Report
Share
Report
Share
1 of 42
Download now
Recommended
Chapter 5 Cost Behavior: Analysis and Use
Chapter 5 Cost Behavior: Analysis and Use
Việt Hoàng Dương
Cost behavior
Cost behavior
Ibrar butt
Notes on Cost volume profit analysis
Notes on Cost volume profit analysis
Yamini Kahaliya
Absorption costing vs variable costing
Absorption costing vs variable costing
Shankar Jyoti Doley
Cost volume profit analysis
Cost volume profit analysis
kamran
Chapter 6 Cost-Volume-Profit Relationships
Chapter 6 Cost-Volume-Profit Relationships
Việt Hoàng Dương
Operating, financial and combined leverage
Operating, financial and combined leverage
Simran Kaur
Flexible budget
Flexible budget
Arsalan Khan
Recommended
Chapter 5 Cost Behavior: Analysis and Use
Chapter 5 Cost Behavior: Analysis and Use
Việt Hoàng Dương
Cost behavior
Cost behavior
Ibrar butt
Notes on Cost volume profit analysis
Notes on Cost volume profit analysis
Yamini Kahaliya
Absorption costing vs variable costing
Absorption costing vs variable costing
Shankar Jyoti Doley
Cost volume profit analysis
Cost volume profit analysis
kamran
Chapter 6 Cost-Volume-Profit Relationships
Chapter 6 Cost-Volume-Profit Relationships
Việt Hoàng Dương
Operating, financial and combined leverage
Operating, financial and combined leverage
Simran Kaur
Flexible budget
Flexible budget
Arsalan Khan
Financial modeling techniques
Financial modeling techniques
eduCBA
CVP Analysis
CVP Analysis
Chandrakant Phad
Cost of capital
Cost of capital
Jubayer Alam Shoikat
Nature of Costs
Nature of Costs
Joseph Oloba
Activity-Based Costing System
Activity-Based Costing System
Ahmad Tariq Bhatti
Managerial Accounting Garrison Noreen Brewer Chapter 07
Managerial Accounting Garrison Noreen Brewer Chapter 07
Asif Hasan
| Managerial Accounting | Chapter 8 | Master Budgeting | Introduction to Mana...
| Managerial Accounting | Chapter 8 | Master Budgeting | Introduction to Mana...
Ahmad Hassan
Modigliani and miller approach
Modigliani and miller approach
MeenuKhurana7
Managerial Economics (Chapter 8 - Theory and Estimation of Cost)
Managerial Economics (Chapter 8 - Theory and Estimation of Cost)
Nurul Shareena Misran
Basics of cost accounting
Basics of cost accounting
kpgandhi
Cost of capital ppt @ bec doms on finance
Cost of capital ppt @ bec doms on finance
Babasab Patil
Financial Planning and Forecasting
Financial Planning and Forecasting
FinOnseT
Breakeven Analysis (Introduction)
Breakeven Analysis (Introduction)
tutor2u
Cost accounting
Cost accounting
Khalid Aziz
Cost accounting
Cost accounting
Ekta Patel
Activity based costing & activity based management
Activity based costing & activity based management
Piyush Gaur
Activity Based Costing
Activity Based Costing
Vikas Gupta
Cost concepts
Cost concepts
wolfaze
Cost Volume Profit Analysis
Cost Volume Profit Analysis
Mohammed Alashi
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
Ahmad Hassan
Relating to IT & marketing Lockitron
Relating to IT & marketing Lockitron
qazi jawad khalid
E245 dcveritas week8
E245 dcveritas week8
Stanford University
More Related Content
What's hot
Financial modeling techniques
Financial modeling techniques
eduCBA
CVP Analysis
CVP Analysis
Chandrakant Phad
Cost of capital
Cost of capital
Jubayer Alam Shoikat
Nature of Costs
Nature of Costs
Joseph Oloba
Activity-Based Costing System
Activity-Based Costing System
Ahmad Tariq Bhatti
Managerial Accounting Garrison Noreen Brewer Chapter 07
Managerial Accounting Garrison Noreen Brewer Chapter 07
Asif Hasan
| Managerial Accounting | Chapter 8 | Master Budgeting | Introduction to Mana...
| Managerial Accounting | Chapter 8 | Master Budgeting | Introduction to Mana...
Ahmad Hassan
Modigliani and miller approach
Modigliani and miller approach
MeenuKhurana7
Managerial Economics (Chapter 8 - Theory and Estimation of Cost)
Managerial Economics (Chapter 8 - Theory and Estimation of Cost)
Nurul Shareena Misran
Basics of cost accounting
Basics of cost accounting
kpgandhi
Cost of capital ppt @ bec doms on finance
Cost of capital ppt @ bec doms on finance
Babasab Patil
Financial Planning and Forecasting
Financial Planning and Forecasting
FinOnseT
Breakeven Analysis (Introduction)
Breakeven Analysis (Introduction)
tutor2u
Cost accounting
Cost accounting
Khalid Aziz
Cost accounting
Cost accounting
Ekta Patel
Activity based costing & activity based management
Activity based costing & activity based management
Piyush Gaur
Activity Based Costing
Activity Based Costing
Vikas Gupta
Cost concepts
Cost concepts
wolfaze
Cost Volume Profit Analysis
Cost Volume Profit Analysis
Mohammed Alashi
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
Ahmad Hassan
What's hot
(20)
Financial modeling techniques
Financial modeling techniques
CVP Analysis
CVP Analysis
Cost of capital
Cost of capital
Nature of Costs
Nature of Costs
Activity-Based Costing System
Activity-Based Costing System
Managerial Accounting Garrison Noreen Brewer Chapter 07
Managerial Accounting Garrison Noreen Brewer Chapter 07
| Managerial Accounting | Chapter 8 | Master Budgeting | Introduction to Mana...
| Managerial Accounting | Chapter 8 | Master Budgeting | Introduction to Mana...
Modigliani and miller approach
Modigliani and miller approach
Managerial Economics (Chapter 8 - Theory and Estimation of Cost)
Managerial Economics (Chapter 8 - Theory and Estimation of Cost)
Basics of cost accounting
Basics of cost accounting
Cost of capital ppt @ bec doms on finance
Cost of capital ppt @ bec doms on finance
Financial Planning and Forecasting
Financial Planning and Forecasting
Breakeven Analysis (Introduction)
Breakeven Analysis (Introduction)
Cost accounting
Cost accounting
Cost accounting
Cost accounting
Activity based costing & activity based management
Activity based costing & activity based management
Activity Based Costing
Activity Based Costing
Cost concepts
Cost concepts
Cost Volume Profit Analysis
Cost Volume Profit Analysis
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
Viewers also liked
Relating to IT & marketing Lockitron
Relating to IT & marketing Lockitron
qazi jawad khalid
E245 dcveritas week8
E245 dcveritas week8
Stanford University
E245 Session 08 Resources and Expenses
E245 Session 08 Resources and Expenses
Stanford University
E245 agora week8
E245 agora week8
Stanford University
Customer Development/Lean Startup 092609 class 7 and 8
Customer Development/Lean Startup 092609 class 7 and 8
Stanford University
E245 personallibs week8
E245 personallibs week8
Stanford University
UCSF LIfe Sciences Week 7 Digital Health: Resources, activities, and costs
UCSF LIfe Sciences Week 7 Digital Health: Resources, activities, and costs
Stanford University
UCSF Life Sciences: Week 7 Therapeutics: Resources, Activities, Costs
UCSF Life Sciences: Week 7 Therapeutics: Resources, Activities, Costs
Stanford University
UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs
UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs
Stanford University
E245 autonomow week8
E245 autonomow week8
Stanford University
Viewers also liked
(10)
Relating to IT & marketing Lockitron
Relating to IT & marketing Lockitron
E245 dcveritas week8
E245 dcveritas week8
E245 Session 08 Resources and Expenses
E245 Session 08 Resources and Expenses
E245 agora week8
E245 agora week8
Customer Development/Lean Startup 092609 class 7 and 8
Customer Development/Lean Startup 092609 class 7 and 8
E245 personallibs week8
E245 personallibs week8
UCSF LIfe Sciences Week 7 Digital Health: Resources, activities, and costs
UCSF LIfe Sciences Week 7 Digital Health: Resources, activities, and costs
UCSF Life Sciences: Week 7 Therapeutics: Resources, Activities, Costs
UCSF Life Sciences: Week 7 Therapeutics: Resources, Activities, Costs
UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs
UCSF Life Sciences: Week 7 Devices Resources, Activities and Costs
E245 autonomow week8
E245 autonomow week8
Similar to Cost Behavior Analysis
B3 perilaku biaya
B3 perilaku biaya
Sejahtera Affif
b3_perilaku_biaya.ppt
b3_perilaku_biaya.ppt
yusuf49582
B3 perilaku biaya
B3 perilaku biaya
koranbekas
yrtyt
yrtyt
ssuserce9546
Presentation2
Presentation2
murk naz
105136
105136
skillssoft
Cvp
Cvp
AbhinavJohn
Chapter 07 Marginal Costing
Chapter 07 Marginal Costing
ayanthimadhumali
Variance Analysis.pptx
Variance Analysis.pptx
VrutikJentibhaiSangh
Cost Behaviors
Cost Behaviors
brywar93
Gnb 07 12e
Gnb 07 12e
Saif Mahmud
Cost market & competitive analysis
Cost market & competitive analysis
Anupam Ghosh
Chapter 2 cost terms, concepts and classifications 2012 students(1)
Chapter 2 cost terms, concepts and classifications 2012 students(1)
Abu_Islam
Whbm19
Whbm19
Shakeel Ahmed
Whbm19
Whbm19
PMAS UIIT Rawalpindi
Ch 5 Cost-Volume-Profit Relationships.pdf
Ch 5 Cost-Volume-Profit Relationships.pdf
khawlamuseabd
chap05notes.pdf
chap05notes.pdf
Ellamae79
Costs separation copy.ppt
Costs separation copy.ppt
ssuserc964b1
B8 relevan cost
B8 relevan cost
Sejahtera Affif
Managerial Accounting Garrison Noreen Brewer Chapter 10
Managerial Accounting Garrison Noreen Brewer Chapter 10
Asif Hasan
Similar to Cost Behavior Analysis
(20)
B3 perilaku biaya
B3 perilaku biaya
b3_perilaku_biaya.ppt
b3_perilaku_biaya.ppt
B3 perilaku biaya
B3 perilaku biaya
yrtyt
yrtyt
Presentation2
Presentation2
105136
105136
Cvp
Cvp
Chapter 07 Marginal Costing
Chapter 07 Marginal Costing
Variance Analysis.pptx
Variance Analysis.pptx
Cost Behaviors
Cost Behaviors
Gnb 07 12e
Gnb 07 12e
Cost market & competitive analysis
Cost market & competitive analysis
Chapter 2 cost terms, concepts and classifications 2012 students(1)
Chapter 2 cost terms, concepts and classifications 2012 students(1)
Whbm19
Whbm19
Whbm19
Whbm19
Ch 5 Cost-Volume-Profit Relationships.pdf
Ch 5 Cost-Volume-Profit Relationships.pdf
chap05notes.pdf
chap05notes.pdf
Costs separation copy.ppt
Costs separation copy.ppt
B8 relevan cost
B8 relevan cost
Managerial Accounting Garrison Noreen Brewer Chapter 10
Managerial Accounting Garrison Noreen Brewer Chapter 10
Recently uploaded
Gas measurement O2,Co2,& ph) 04/2024.pptx
Gas measurement O2,Co2,& ph) 04/2024.pptx
Dr.Ibrahim Hassaan
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
iammrhaywood
Romantic Opera MUSIC FOR GRADE NINE pptx
Romantic Opera MUSIC FOR GRADE NINE pptx
sqpmdrvczh
AmericanHighSchoolsprezentacijaoskolama.
AmericanHighSchoolsprezentacijaoskolama.
arsicmarija21
Alper Gobel In Media Res Media Component
Alper Gobel In Media Res Media Component
InMediaRes1
Field Attribute Index Feature in Odoo 17
Field Attribute Index Feature in Odoo 17
Celine George
Difference Between Search & Browse Methods in Odoo 17
Difference Between Search & Browse Methods in Odoo 17
Celine George
Framing an Appropriate Research Question 6b9b26d93da94caf993c038d9efcdedb.pdf
Framing an Appropriate Research Question 6b9b26d93da94caf993c038d9efcdedb.pdf
UjwalaBharambe
ENGLISH6-Q4-W3.pptxqurter our high choom
ENGLISH6-Q4-W3.pptxqurter our high choom
nelietumpap1
TataKelola dan KamSiber Kecerdasan Buatan v022.pdf
TataKelola dan KamSiber Kecerdasan Buatan v022.pdf
Sarwono Sutikno, Dr.Eng.,CISA,CISSP,CISM,CSX-F
Judging the Relevance and worth of ideas part 2.pptx
Judging the Relevance and worth of ideas part 2.pptx
SherlyMaeNeri
ENGLISH 7_Q4_LESSON 2_ Employing a Variety of Strategies for Effective Interp...
ENGLISH 7_Q4_LESSON 2_ Employing a Variety of Strategies for Effective Interp...
JhezDiaz1
Solving Puzzles Benefits Everyone (English).pptx
Solving Puzzles Benefits Everyone (English).pptx
OH TEIK BIN
Roles & Responsibilities in Pharmacovigilance
Roles & Responsibilities in Pharmacovigilance
SamikshaHamane
AMERICAN LANGUAGE HUB_Level2_Student'sBook_Answerkey.pdf
AMERICAN LANGUAGE HUB_Level2_Student'sBook_Answerkey.pdf
phamnguyenenglishnb
Hierarchy of management that covers different levels of management
Hierarchy of management that covers different levels of management
mkooblal
MULTIDISCIPLINRY NATURE OF THE ENVIRONMENTAL STUDIES.pptx
MULTIDISCIPLINRY NATURE OF THE ENVIRONMENTAL STUDIES.pptx
Anupkumar Sharma
OS-operating systems- ch04 (Threads) ...
OS-operating systems- ch04 (Threads) ...
Dr. Mazin Mohamed alkathiri
HỌC TỐT TIẾNG ANH 11 THEO CHƯƠNG TRÌNH GLOBAL SUCCESS ĐÁP ÁN CHI TIẾT - CẢ NĂ...
HỌC TỐT TIẾNG ANH 11 THEO CHƯƠNG TRÌNH GLOBAL SUCCESS ĐÁP ÁN CHI TIẾT - CẢ NĂ...
Nguyen Thanh Tu Collection
ACC 2024 Chronicles. Cardiology. Exam.pdf
ACC 2024 Chronicles. Cardiology. Exam.pdf
SpandanaRallapalli
Recently uploaded
(20)
Gas measurement O2,Co2,& ph) 04/2024.pptx
Gas measurement O2,Co2,& ph) 04/2024.pptx
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
ECONOMIC CONTEXT - PAPER 1 Q3: NEWSPAPERS.pptx
Romantic Opera MUSIC FOR GRADE NINE pptx
Romantic Opera MUSIC FOR GRADE NINE pptx
AmericanHighSchoolsprezentacijaoskolama.
AmericanHighSchoolsprezentacijaoskolama.
Alper Gobel In Media Res Media Component
Alper Gobel In Media Res Media Component
Field Attribute Index Feature in Odoo 17
Field Attribute Index Feature in Odoo 17
Difference Between Search & Browse Methods in Odoo 17
Difference Between Search & Browse Methods in Odoo 17
Framing an Appropriate Research Question 6b9b26d93da94caf993c038d9efcdedb.pdf
Framing an Appropriate Research Question 6b9b26d93da94caf993c038d9efcdedb.pdf
ENGLISH6-Q4-W3.pptxqurter our high choom
ENGLISH6-Q4-W3.pptxqurter our high choom
TataKelola dan KamSiber Kecerdasan Buatan v022.pdf
TataKelola dan KamSiber Kecerdasan Buatan v022.pdf
Judging the Relevance and worth of ideas part 2.pptx
Judging the Relevance and worth of ideas part 2.pptx
ENGLISH 7_Q4_LESSON 2_ Employing a Variety of Strategies for Effective Interp...
ENGLISH 7_Q4_LESSON 2_ Employing a Variety of Strategies for Effective Interp...
Solving Puzzles Benefits Everyone (English).pptx
Solving Puzzles Benefits Everyone (English).pptx
Roles & Responsibilities in Pharmacovigilance
Roles & Responsibilities in Pharmacovigilance
AMERICAN LANGUAGE HUB_Level2_Student'sBook_Answerkey.pdf
AMERICAN LANGUAGE HUB_Level2_Student'sBook_Answerkey.pdf
Hierarchy of management that covers different levels of management
Hierarchy of management that covers different levels of management
MULTIDISCIPLINRY NATURE OF THE ENVIRONMENTAL STUDIES.pptx
MULTIDISCIPLINRY NATURE OF THE ENVIRONMENTAL STUDIES.pptx
OS-operating systems- ch04 (Threads) ...
OS-operating systems- ch04 (Threads) ...
HỌC TỐT TIẾNG ANH 11 THEO CHƯƠNG TRÌNH GLOBAL SUCCESS ĐÁP ÁN CHI TIẾT - CẢ NĂ...
HỌC TỐT TIẾNG ANH 11 THEO CHƯƠNG TRÌNH GLOBAL SUCCESS ĐÁP ÁN CHI TIẾT - CẢ NĂ...
ACC 2024 Chronicles. Cardiology. Exam.pdf
ACC 2024 Chronicles. Cardiology. Exam.pdf
Cost Behavior Analysis
1.
Cost behaviour: Analysis and Use ©The
McGraw-Hill Companies,
2.
Types of Cost
behaviour Patterns Summary of Variable and Fixed Cost Behavior Cost In Total Per Unit Variable Total variable cost is proportional to the activity level within the relevant range. Variable cost per unit remains the same over wide ranges of activity. Fixed Total fixed cost remains the same even when the activity level changes within the relevant range. Fixed cost per unit goes down as activity level goes up. ©The McGraw-Hill Companies,
3.
Total Variable Cost
Example Total Long Distance Telephone Bill Your total long distance telephone bill is based on how many minutes you talk. Minutes Talked ©The McGraw-Hill Companies,
4.
Variable Cost Per
Unit Example Per Minute Telephone Charge The cost per minute talked is constant. For example, 10 pence per minute. Minutes Talked ©The McGraw-Hill Companies,
5.
Total Fixed Cost
Example Monthly Basic Telephone Bill Your monthly basic telephone bill is probably fixed and does not change when you make more local calls. Number of Local Calls ©The McGraw-Hill Companies,
6.
Fixed Cost Per
Unit Example Monthly Basic Telephone Bill per Local Call The fixed cost per local call decreases as more local calls are made. Number of Local Calls ©The McGraw-Hill Companies,
7.
Cost behaviour Examples of
normally variable costs Merchandisers Service Organizations Cost of Goods Sold Supplies and travel Manufacturers Merchandisers and Manufacturers Direct Material, Direct labour, and Variable Manufacturing Overhead Sales commissions and shipping costs Examples of normally fixed costs Merchandisers, manufacturers, and service organizations Real estate taxes, Insurance, Sales salaries Depreciation, Advertising ©The McGraw-Hill Companies,
8.
The Activity Base Units produced Machine hours A
measure of the event causing the incurrence of a variable cost – a cost driver Miles driven Labour hours ©The McGraw-Hill Companies,
9.
Step-Variable Costs Cost Total cost
remains constant within a narrow range of activity. Activity ©The McGraw-Hill Companies,
10.
Step Costs Cost Total cost
increases to a new higher cost for the next higher range of activity. Activity ©The McGraw-Hill Companies,
11.
The Linearity Assumption
and the Relevant Range Total Cost Economist’s Curvilinear Cost Function Activity ©The McGraw-Hill Companies,
12.
The Linearity Assumption
and the Relevant Range Total Cost Economist’s Curvilinear Cost Function Accountant’s Straight-Line Approximation (constant unit variable cost) Activity ©The McGraw-Hill Companies,
13.
Total Cost The Linearity
Assumption and the Relevant Range Relevant Range A straight line A straight line closely closely Economist’s approximates Curvilinear Cost approximates a curvilinear a curvilinear Function variable cost variable cost line within the line within the relevant relevant range. range. Accountant’s Straight-Line Approximation (constant unit variable cost) Activity ©The McGraw-Hill Companies,
14.
Types of Fixed
Costs Fixed Costs Committed Discretionary Long-term, cannot be reduced in the short term. May be altered in the short-term by current managerial decisions Examples Examples Depreciation on Buildings and Equipment Advertising and Research and Development ©The McGraw-Hill Companies,
15.
Trend Toward Fixed
Costs Increased automation. Increase in salaried knowledge workers who are difficult to train and replace. Implications Implications Managers are more “locked-in” with fewer decision Managers are more “locked-in” with fewer decision alternatives. alternatives. Planning becomes more crucial because fixed costs are Planning becomes more crucial because fixed costs are difficult to change with current operating decisions. difficult to change with current operating decisions. ©The McGraw-Hill Companies,
16.
Fixed Costs and
Relevant Range Example: Office space is available at a rental rate of £30,000 per year in increments of 1,000 square metres. As the business grows more space is rented, increasing the total cost. Continue ©The McGraw-Hill Companies,
17.
Rent Cost in Thousands
of pounds Fixed Costs and Relevant Range 90 60 30 00 Relevant Range Total cost doesn’t change for a wide range of activity, and then jumps to a new higher cost for the next higher range of activity. 1,000 2,000 3,000 Rented Area (Square metres) ©The McGraw-Hill Companies,
18.
Semi-variable Costs (also called
mixed cost) A semi-variable cost has both fixed and variable components. Consider the following electric utility example. ©The McGraw-Hill Companies,
19.
Mixed Costs Total Utility
Cost Y tal To ixe m os dc t Variable Utility Charge Fixed Monthly Activity (Kilowatt Hours) X Utility Charge ©The McGraw-Hill Companies,
20.
Mixed Costs The total
mixed cost line can be expressed as an equation: Y = a + bX Total Utility Cost Y Where: tal To ixe m os dc t Y = the total mixed cost bX + =aa Y = the total fixed cost (the vertical intercept of the line) b = the variable Variable cost per unit of activity (the slope of the line) Utility Charge X = the level of activity Fixed Monthly Activity (Kilowatt Hours) X Utility Charge ©The McGraw-Hill Companies,
21.
Mixed Costs Total Utility
Cost Y tal To ixe m os dc t =a Y bX + Variable bX Utility Charge Fixed Monthly a Activity (Kilowatt Hours) X Utility Charge ©The McGraw-Hill Companies,
22.
The Analysis of
Mixed Costs Account Analysis Engineering Approach High-Low Method Scattergraph Method Least-Square Regression Method ©The McGraw-Hill Companies,
23.
Account Analysis Each account
is classified as either variable or fixed based on the analyst’s knowledge of how the account behaves. ©The McGraw-Hill Companies,
24.
Engineering Estimates Cost estimates
are based on an evaluation of production methods, and material, labour and overhead requirements. ©The McGraw-Hill Companies,
25.
The High-Low Method WiseCo
recorded the following production activity and maintenance costs for two months: High activity level Low activity level Change Units 9,000 5,000 4,000 Cost £ 9,700 6,100 £ 3,600 Using these two levels of activity, compute: the variable cost per unit; the fixed cost; and then express the costs in equation form Y = a + bX. ©The McGraw-Hill Companies,
26.
The High-Low Method High
activity level Low activity level Change Unit variable cost = Units 9,000 5,000 4,000 Cost £ 9,700 6,100 £ 3,600 Change in cost Change in units ©The McGraw-Hill Companies,
27.
The High-Low Method High
activity level Low activity level Change Units 9,000 5,000 4,000 Cost £ 9,700 6,100 £ 3,600 Unit variable cost = £3,600 ÷ 4,000 units = £0.90 per unit ©The McGraw-Hill Companies,
28.
The High-Low Method High
activity level Low activity level Change Units 9,000 5,000 4,000 Cost £ 9,700 6,100 £ 3,600 Unit variable cost = £3,600 ÷ 4,000 units = £0.90 per unit Fixed cost = Total cost – Total variable cost Fixed cost = £9,700 – (£0.90 per unit × 9,000 units) Fixed cost = £9,700 – £8,100 = £1,600 ©The McGraw-Hill Companies,
29.
The High-Low Method High
activity level Low activity level Change Units 9,000 5,000 4,000 Cost £ 9,700 6,100 £ 3,600 Unit variable cost = £3,600 ÷ 4,000 units = £0.90 per unit Fixed cost = Total cost – Total variable cost Fixed cost = £9,700 – (£0.90 per unit × 9,000 units) Fixed cost = £9,700 – £8,100 = £1,600 Total cost = Fixed cost + Variable cost (Y = a + bX) Y = £1,600 + £0.90X ©The McGraw-Hill Companies,
30.
The High-Low Method If
sales salaries and commissions are £10,000 If sales salaries and commissions are £10,000 when 80,000 units are sold and £14,000 when when 80,000 units are sold and £14,000 when 120,000 units are sold, what is the variable 120,000 units are sold, what is the variable portion of sales salaries and commission? portion of sales salaries and commission? a. £0.08 per unit a. £0.08 per unit b. £0.10 per unit b. £0.10 per unit c. £0.12 per unit c. £0.12 per unit d. £0.125 per unit d. £0.125 per unit ©The McGraw-Hill Companies,
31.
The High-Low Method If
sales salaries and commissions are £10,000 If sales salaries and commissions are £10,000 when 80,000 units are sold and £14,000 when when 80,000 units are sold and £14,000 when 120,000 units are sold, what is the variable 120,000 units are sold, what is the variable portion of sales salaries and commission? portion of sales salaries and commission? a. £0.08 per unit a. £0.08 per unit Units Cost b. £0.10 per unit High level 120,000 £ 14,000 b. £0.10 per unit Low level 80,000 10,000 c. £0.12 per unit c. £0.12 per unit Change 40,000 £ 4,000 d. £0.125 per unit d. £0.125 per unit £4,000 ÷ 40,000 units = £0.10 per unit ©The McGraw-Hill Companies,
32.
The High-Low Method If
sales salaries and commissions are £10,000 If sales salaries and commissions are £10,000 when 80,000 units are sold and £14,000 when when 80,000 units are sold and £14,000 when 120,000 units are sold, what is the fixed portion 120,000 units are sold, what is the fixed portion of sales salaries and commissions? of sales salaries and commissions? a. £ 2,000 a. £ 2,000 b. £ 4,000 b. £ 4,000 c. £10,000 c. £10,000 d. £12,000 d. £12,000 ©The McGraw-Hill Companies,
33.
The High-Low Method If
sales salaries and commissions are £10,000 If sales salaries and commissions are £10,000 when 80,000 units are sold and £14,000 when when 80,000 units are sold and £14,000 when 120,000 units are sold, what is the fixed portion 120,000 units are sold, what is the fixed portion of sales salaries and commissions? fixed cost + Total cost = Total of sales salaries and commissions? Total variable cost a. £ 2,000 a. £ 2,000 £ 14,000 = Total fixed cost + b. £ 4,000 b. £ 4,000 (£0.10 × 120,000 units) c. £10,000 c. £10,000 Total fixed cost = £14,000 - £12,000 d. £12,000 d. £12,000 Total fixed cost = £ 2,000 ©The McGraw-Hill Companies,
34.
The Scattergraph Method Plot
the data points on a graph (total cost vs. activity). Total Cost in 1,000’s of pounds Y 20 10 0 * * * * * ** * ** X 0 1 2 3 4 Activity, 1,000’s of Units Produced ©The McGraw-Hill Companies,
35.
The Scattergraph Method Draw
a line through the data points with about an equal numbers of points above and below the line. Total Cost in 1,000’s of pounds Y 20 10 0 * * * * * ** * ** X 0 1 2 3 4 Activity, 1,000’s of Units Produced ©The McGraw-Hill Companies,
36.
The Scattergraph Method Total
Cost in 1,000’s of pounds Y The slope of this line is the variable unit cost. (Slope is the change in total cost for a one unit change in activity). 20 10 * * * * * ** * ** Estimated fixed cost = £10,000 0 X 0 1 2 3 4 Activity, 1,000’s of Units Produced ©The McGraw-Hill Companies,
37.
The Scattergraph Method Slope
= Total Cost in 1,000’s of pounds Y 20 10 * * * * Change in cost Change in units * ** * ** Vertical distance is the change in cost. Horizontal distance is the change in activity. 0 X 0 1 2 3 4 Activity, 1,000’s of Units Produced ©The McGraw-Hill Companies,
38.
Least-Squares Regression Method • Accountants
and managers may use computer software to fit a regression line through the data points. • The cost analysis objective is the same: Y = a + bx Least-squares regression also provides a statistic, called Least-squares regression also provides a statistic, called the adjusted R22,that is a measure of the goodness the adjusted R , that is a measure of the goodness of fit of the regression line to the data points. of fit of the regression line to the data points. ©The McGraw-Hill Companies,
39.
Least-Squares Regression Method R2 is
the percentage of the variation in total cost explained by the activity. Total Cost Y 20 * * * * 10 0 0 * ** * ** R2 for this relationship is near 100% since the data points are very close to the regression line. X 1 2 3 4 ©The McGraw-Hill Companies, Activity
40.
The Contribution Format Let’s
put our knowledge of cost behaviour to work by preparing a contribution format profit statement. ©The McGraw-Hill Companies,
41.
The Contribution Format Sales
Revenue Less: Variable costs Contribution margin Less: Fixed costs Net profit Total £ 100,000 60,000 £ 40,000 30,000 £ 10,000 Unit £ 50 30 £ 20 The contribution margin format emphasizes cost behaviour. Contribution margin covers fixed costs and provides for profit. ©The McGraw-Hill Companies,
42.
The Contribution Format Comparison
of the Contribution Profit Statement with the Traditional Profit Statement Traditional Approach (costs organized by function) Contribution Approach (costs organized by behavior) Sales £ 100,000 Less cost of goods sold 70,000 Gross margin £ 30,000 Less operating expenses 20,000 Net profit £ 10,000 Sales £ 100,000 Less variable expenses 60,000 Contribution margin £ 40,000 Less fixed expenses 30,000 Net profit £ 10,000 Used primarily for external reporting. Used primarily by management. ©The McGraw-Hill Companies,
Download now