Академический Документы
Профессиональный Документы
Культура Документы
s
o
f
D
o
l
l
a
r
s
10
20
0
*
*
*
*
*
*
*
*
*
Activity, 1,000s of Units Produced
Visual-Fit Method
6-27
Draw a line through the plotted data points so that about
equal numbers of points fall above and below the line.
Visual-Fit Method
0 1 2 3 4
*
T
o
t
a
l
C
o
s
t
i
n
1
,
0
0
0
s
o
f
D
o
l
l
a
r
s
10
20
0
*
*
*
*
*
*
*
*
*
Activity, 1,000s of Units Produced
6-28
Visual-Fit Method
Vertical distance
is total cost,
approximately
$16,000.
0 1 2 3 4
*
T
o
t
a
l
C
o
s
t
i
n
1
,
0
0
0
s
o
f
D
o
l
l
a
r
s
10
20
0
*
*
*
*
*
*
*
*
*
Activity, 1,000s of Units Produced
Estimated fixed cost = $10,000
6-29
The High-Low Method
Owl Co recorded the following production activity &
maintenance costs for two months:
Using these two levels of activity, compute:
the variable cost per unit.
the total fixed cost.
Units Cost
High activity level 9,000 9,700 $
Low activity level 5,000 6,100
6-30
Units Cost
High activity level 9,000 9,700 $
Low activity level 5,000 6,100
Change 4,000 3,600 $
The High-Low Method
6-31
Units Cost
High activity level 9,000 9,700 $
Low activity level 5,000 6,100
Change 4,000 3,600 $
Unit variable cost =
in cost
in units
The High-Low Method
6-32
Units Cost
High activity level 9,000 9,700 $
Low activity level 5,000 6,100
Change 4,000 3,600 $
Unit variable cost = $3,600 4,000 units = $0.90 per unit
The High-Low Method
6-33
Units Cost
High activity level 9,000 9,700 $
Low activity level 5,000 6,100
Change 4,000 3,600 $
Unit variable cost = $3,600 4,000 units = $0.90 per unit
Fixed cost = Total cost Total variable cost
The High-Low Method
6-34
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)
Units Cost
High activity level 9,000 9,700 $
Low activity level 5,000 6,100
Change 4,000 3,600 $
The High-Low Method
6-35
Units Cost
High activity level 9,000 9,700 $
Low activity level 5,000 6,100
Change 4,000 3,600 $
Unit variable cost = $3,600 4,000 units = $.90 per unit
Fixed cost = Total cost Total variable cost
Fixed cost = $9,700 ($.90 per unit 9,000 units)
Fixed cost = $9,700 $8,100 = $1,600
The High-Low Method
6-36
Least-Squares Regression Method
Regression is a statistical procedure used
to determine the relationship between variables
such as activity and cost.
Activity
T
o
t
a
l
C
o
s
t
The objective of
the regression
method is the
general cost equation:
Y = a + bX
6-37
Y = a + bX
Total Cost is the
dependent variable.
The activity (X) is the
independent variable.
The X term coefficient (b)
is the estimate of variable
cost per unit of activity,
the slope of the cost line.
The intercept term (a) is
the estimate of fixed costs.
Equation Form of Least-Squares
Regression Line
6-38
Least-Squares Regression Method
Statistics courses and
computer courses deal
with detailed regression
computations using
Microsoft Excel.
Accountants and
managers must be able to
interpret and use
regression estimates.
6-39
Learning Objective 6
6-40
Terms in the equation have the same
meaning as in simple regression with
only one independent variable.
Multiple Regression
Multiple regression includes two or more independent
variables:
Y = a + b
1
X
1
+ b
2
X
2
6-41
Engineering Method
of Cost Estimation
Cost estimates are based on measurement
and pricing of the work involved.
6-42
Direct Labor
Material required
for each unit is
obtained from
engineering drawings
and specification sheets.
Material prices are
determined from
vendor bids.
Analyze the kind
of work performed.
Estimate the time
required for each labor
skill for each unit.
Use local wage rates to
obtain labor cost
per unit.
Direct Material
Engineering Method
of Cost Estimation
6-43
Effect of Learning
on Cost Behavior
As I make more of these
things it takes me less
time for each one. It must
be the learning curve effect
that the boss was
talking about.
Ive noticed the same
thing. And if you include
all the variable overhead
costs that are also
declining, that must be
the experience curve.
6-44
Learning Curve
Cumulative Production Output
A
v
e
r
a
g
e
L
a
b
o
r
T
i
m
e
p
e
r
U
n
i
t
Learning effects
are large initially.
Learning effects
become smaller, eventually
reaching steady state.
6-45
Learning Objective 7
6-46
Data Collection Problems
1. Missing data.
2. Outlier data points.
3. Mismatched time periods costs.
4. Trade-offs in choosing the time period.
5. Allocated and discretionary costs.
6. Inflation.
6-47
End of Chapter 6
6-48