1 / 25

Managerial Accounting: An Introduction To Concepts, Methods, And Uses

Managerial Accounting: An Introduction To Concepts, Methods, And Uses. Chapter 5 Cost Drivers and Cost Behavior. Maher, Stickney and Weil. Learning Objectives (Slide 1 of 2). Distinguish between variable costs & fixed costs, between short run & long run, and define the relevant range.

lhaynes
Download Presentation

Managerial Accounting: An Introduction To Concepts, Methods, And Uses

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Managerial Accounting: An Introduction To Concepts, Methods, And Uses Chapter 5 Cost Drivers and Cost Behavior Maher, Stickney and Weil

  2. Learning Objectives(Slide 1 of 2) • Distinguish between variable costs & fixed costs, between short run & long run, and define the relevant range. • Identify capacity costs, committed costs, & discretionary costs. • Describe the nature of the various cost behavior patterns. • Describe how managers use cost behavior patterns. • Explain how to use historical data to estimate costs.

  3. Learning Objectives(Slide 2 of 2) • Describe how analysts estimate cost behavior using regression, account analysis, & engineering methods. • Explain the costs, benefits, & weaknesses of the various cost estimation methods. • Identify the derivation of learning curves. (Appendix 5.1) • Interpret the results of regression analyses. (Appendix 5.2)

  4. Describe the Nature of Fixed & Variable Costs • Variable costs - change in total as the level of activity changes • Also known as an engineered cost • There is a definitive physical relationship to the activity measure • Fixed costs - do not change in total with changes in activity levels. What is the equation?

  5. Describe the Nature of Fixed & Variable Costs(Continued)

  6. Types of Fixed Costs(Slide 1 of 2) • Define Capacity costs-

  7. Types of Fixed Costs(Slide 2 of 2) • Define Discretionary costs –

  8. Other Cost Behavior Patterns(Slide 1 of 2) Define Curvilinear variable costs –

  9. Other Cost Behavior Patterns (Slide 2 of 2) • Define Learning curves –

  10. $ Activity Define Semivariable Costs • Refers to costs that have both variable and fixed components • Examples: repair and maintenance costs, utility costs

  11. Describe Semifixed Costs Refers to costs that increase in steps • Example: A quality-control inspector can examine 1,000 units per day. Inspection costs are semifixed with a step up for every 1,000 units per day • Distinction between fixed and semifixed is subtle • Change in fixed costs usually involves a change in long-term assets: a change in semifixed costs often does not

  12. Cost Estimation Methods • Cost estimates are used in various business decisions, planning exercises, and performance evaluations • List the Three methods discussed

  13. Estimating Costs Using Historical Data (Slide 1 of 2) • Trying to estimate fixed and variable costs using the following formula • TC=F + VX • Where: TC = Total Costs • F = Fixed Costs • V = Variable Costs • X = Activity Variable

  14. Estimating Costs Using Historical Data (Slide 2 of 2) • The following steps should be taken in analyzing cost data: • Review alternative cost drivers • Plot the data • Examine the data and method of accumulation

  15. Statistical Regression Analysis (Slide 1 of 2) • Used to estimate the relationship between costs and the activity that caused, or is closely associated with, those costs • Costs are the dependent variable(s) • Activity level is the independent variable • Fits the data points to a line using least-squares criterion

  16. Statistical Regression Analysis (Slide 1 of 2) • Results of this analysis yield an estimate of both the fixed component and the cost driver rates (variable component)

  17. Discuss Account Analysis

  18. Engineering Method of Estimating Costs • The engineering method indicates what costs should be • Analysts study the physical relation between the quantity of inputs and outputs • Determine the steps required to perform the task, the time needed to complete each step, the number & type of employees required, & the materials & other inputs needed • The accountant assigns costs to each of the inputs to estimate the cost of the outputs

  19. What are some common data problems?

  20. Review Interpreting Regression Analysis Output (Slide 1 of 3)

  21. Review Interpreting Regression Analysis Output(Slide 2 of 3)

  22. Review Interpreting Regression Analysis Output(Slide 3 of 3)

  23. What is R2?

  24. What are some cautions when using regression?

  25. If you have any comments or suggestions concerning this PowerPoint Presentation for Managerial Accounting, An Introduction To Concepts, Methods, And Uses, please contact: • Dr. Michael Blue, CFE, CPA, CMA • blue@bloomu.edu Bloomsburg University of Pennsylvania

More Related