Transcript No Slide Title

2-1
Chapter 2
Activity Cost Analysis
and Planning
Prepared by
Douglas Cloud
Pepperdine
University
2-2
Basic Cost Behavior Patterns
Total variable costs increase in proportion
to increases in unit level cost drivers.
Total
variable
costs (Y)
0
0
Total activity (X)
2-3
Basic Cost Behavior Patterns
Total fixed costs increase in proportion
to increases in unit level cost drivers.
Total
fixed
costs
(Y)
0
0
Total activity (X)
2-4
Basic Cost Behavior Patterns
Total mixed costs contain fixed and variable
cost elements. They increase, but not in direct
proportion to increases in unit level cost drivers.
Total
mixed
costs
(Y)
Sometimes
called semivariable
costs
0
0
Total activity (X)
2-5
Basic Cost Behavior Patterns
Total step costs are constant over a range of
activity for a unit-level cost driver but move to a
different amount at different ranges.
Total
step
costs
(Y)
0
0
Total activity (X)
2-6
Economists’ Curvilinear
Total Cost Pattern
Total
power
costs
Relevant range
for which linear
patterns are valid
Normal
activity
range
0
0
Units produced
2-7
Fixed Costs
Committed costs (Capacity
costs) are required to maintain the
current service or production
capacity to fill previous legal
commitments.
2-8
Fixed Costs
Discretionary costs
(Program costs) are
set at a fixed amount
each year at the
discretion of
management.
2-9
High-Low Cost Estimation
Number of
Shipments
Packaging
Costs
January
6,000
$17,000
February
9,000
26,000
High activity period
March
12,000
32,000
April
l0,000
20,000
Variable cost
Difference in total costs
per unit (b) = Difference in activity
b = $32,000 - $17,000
12,000 - 6,000
Low activity period
Continued
2-10
High-Low Cost Estimation
Variable cost
$2.50
=
per unit (b)
January
a
= Total costs - Variable costs
$17,000 = a + ($2.50 x 6,000 shipments)
a = $2,000
March
Same answer!
$32,000 = a + ($2.50 x 12,000 shipments)
a = $2,000
2-11
High-Low Cost Estimation
Y = $2,000 + $2.50 X
Total packing
department costs
Number of
shipments
2-12
High-Low Cost Estimation
Difference in
$40,000 --- total costs
Total
Costs
$30,000 --$20,000 --$10,000 --|
$0
0
|
Difference in
activity level
|
5,000
10,000
15,000
Number of Shipments
Variable costs Difference in total costs
=
per unit
Difference in activity
Fixed costs
=
Total costs at either
the high or low costs activity level
Variable costs
computed for
that level
2-13
Least Squares Regression Analysis
• Y(成本) X(數量) Y-Ybar X-Xbar (Y-Ybar)(X-Xbar)
• $17,000 6,000
-6,750 -3,250
21,937,500
• 26,000 9,000
2,250 -250
-562,500
• 32,000 12,000
8,250 2,750
22,687,500
• 20,000 10,000 -3,750
750
-2,812,500
•
41,250,000
Y = a + bx a = ybar – b xbar
b = Sigma(x-xbar)(y-ybar)/Sigma(x-xbar)**2
a=23,750 – 2.2*9,250 = $3,400 b = $2.2
Y = $3,400 + $2.2X
2-14
Changing Composition of Total
Manufacturing Costs
100
Manufacturing overhead has increased
Percent of total
manufacturing
costs
Direct labor has decreased
Direct materials has increased
0
1900
1950
Year
2000
2-15
Manufacturing Costs
Direct materials, the
cost of primary raw
materials converted
into finished goods.
The word “direct”
Direct labor, the wages
indicates costs that
are by production
earned
easily or directly
employeesManufacturing
for the time overhead
traced to a finished
they spend
converting
includes
all manufacturing
product or service.
raw materials
costsinto
other than direct
finishedmaterials
products.and direct labor.
2-16
Manufacturing Cost Hierarchy
 Unit level activities
 Batch level activities
 Product level activities
 Facility level activities
2-17
Manufacturing Cost Hierarchy
Activity
Level
Reason for Activity
Unit Performed for each
level unit product
produced or sold
Examples of Activity Cost
• Cost of raw materials
• Cost of inserting a
component
• Utilities cost of
operating equipment
• Some costs of packaging
• Sales commissions
2-18
Manufacturing Cost Hierarchy
Activity
Level
Reason for Activity
Batch Performed for each
level batch of product
produced or sold
Examples of Activity Cost
• Cost of processing a
sales order
• Cost of issuing and
tracking work order
• Cost of equipment setup
• Cost of moving batch
between workstations
• Cost of inspection
2-19
Manufacturing Cost Hierarchy
Activity
Level
Reason for Activity
Product Performed to support
level each different
product that can be
produced
Examples of Activity Cost
• Cost of product
development
• Cost of product
marketing such as
advertising
• Cost of specialized
equipment
• Cost of maintaining
specialized equipment
2-20
Manufacturing Cost Hierarchy
Activity
Level
Reason for Activity
Facility Performed to
level maintain general
manufacturing
capabilities
Examples of Activity Cost
• Cost of maintaining
general facilities
• Cost of nonspecialized
equipment
• Cost of real property
taxes
• Cost of general
advertising
• Cost of general
administration