Lecture Fundamentals of cost accounting (4th edition): Chapter 5 - Lanen, Anderson, Maher

(BQ) Chapter 5: Cost estimation. When managers make decisions they need to compare the costs (and benefits) among alternative actions. In this chapter, we discuss how to estimate the costs required for decision making.
Nội dung trích xuất từ tài liệu:
Lecture Fundamentals of cost accounting (4th edition): Chapter 5 - Lanen, Anderson, Maher© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in anymanner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. CostEstimation Chapter5 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., CPAMcGrawHill/Irwin Copyright©2014byTheMcGrawHillCompanies,Inc.Allrightsreserved.LearningObjectivesLO 5-1 Understand the reasons for estimating fixed and variable costs.LO 5-2 Estimate costs using engineering estimates.LO 5-3 Estimate costs using account analysis.LO 5-4 Estimate costs using statistical analysis.LO 5-5 Interpret the results of regression output.LO 5-6 Identify potential problems with regression data.LO 5-7 Evaluate the advantages and disadvantages of alternative cost estimation methods.LO 5-8 (Appendix A) Use Microsoft Excel to perform a regression analysis.LO 5-9 (Appendix B) Understand the mathematical relationship describing the learning phenomenon. 53WhyEstimateCosts? Managers make decisions and need to compare costs and benefits among alternative actions. Cost estimates can be an important element In helping managers make decisions. 54LO5-1 BasicCostBehaviorPatterns LO 5-1 Understandthereasonsforestimatingfixedandvariablecosts. Costs Fixed costs Variable costs Total fixed costs do not Total variable costs change proportionately change proportionately as activity changes. as activity changes. Per unit fixed costs Per unit variable cost change inversely as remain constant as activity changes. activity changes. 55 MethodsUsedtoEstimateLO5-1 CostBehavior Charlene, owner of Charlene’s Computer Care (3C), wants to estimate the cost of a new computer repair center. 1. Engineering estimates 2. Account analysis 3. Statistical methods 56LO5-2 EngineeringEstimates LO 5-2 Estimatecostsusingengineeringestimates. Cost estimates are based on measuring and then pricing the work involved in a task. Identify the activities involved: – Labor – Rent – Insurance Estimate the time and cost for each activity. 57LO5-2 EngineeringEstimates Details each step required to perform an operation Permits comparison of other centers with similar operations Costs for totally new activities can be estimated without prior activity data. Can be quite expensive to use Based on optimal conditions 58LO5-3 AccountAnalysis LO 5-3 Estimatecostsusingaccountanalysis. Review each account comprising the total cost being analyzed. Identify each cost as either fixed or variable. Fixed Variable 59LO5-3 AccountAnalysis Costs for 360 repair-hours Variable Fixed Account Total cost cost Office rent $ 3,375 $1,375 $2,000 Utilities 310 100 210 Administration 3,386 186 3,200 Supplies 2,276 2,176 100 Training 666 316 350 Other 613 257 356 Total $10,626 $4,410 $6,216 Per repair hour $12.25 510LO5-3 AccountAnalysis ...