财务管理教材-The-Nature-of-Cost课件.ppt

1、 The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillManufacturing Cost ConceptsFinancial AccountingCost is a measure of resources used or given up to achieve a stated purpose.Managerial AccountingProduct costs are the costs a company assigns to units produced.The McGraw-Hill Companies,Inc.,2000Irwi

2、n/McGraw-HillDirectMaterialsDirectLaborManufacturingOverheadManufacturing Costs The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillDirect Materials Those materials that become an integral part of the product and that can be conveniently traced directly to it.Example:A radio installed in an automobi

3、le The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillDirect LaborThose labor costs that can be easily traced to individual units of product.Example:Wages paid to automobile assembly workers The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillManufacturing costs that cannot be traced directly to sp

4、ecific units produced.Manufacturing OverheadExamples:Indirect labor and indirect materialsWages paid to employees who are not directly involved in production work.Examples:maintenance workers,janitors and security guards.Materials used to support the production process.Examples:lubricants and cleani

5、ng supplies used in the automobile assembly plant.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillClassifications of CostsDirectMaterialsDirectLaborManufacturingOverheadPrimeCostConversionCostManufacturing costs are oftencombined as follows:The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillNon

6、manufacturing CostsMarketing and selling costs.vCosts necessary to get the order and deliver the product.Administrative costs.vAll executive,organizational,and clerical costs.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillProduct Costs Versus Period Costs Product costs include direct materials,

7、direct labor,and manufacturing overhead.Period costs are not included in product costs.They are expensed on the income statement.InventoryCost of Good SoldBalanceSheetIncomeStatementSaleExpenseIncomeStatement The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillCost Classifications for Predicting Cos

8、t Behavior How a cost will react to changes in the level of business activity.vTotal variable costs change when activity changes.vTotal fixed costs remain unchanged when activity changes.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillTotal Variable Cost Your total long distance telephone bill i

9、s based on how many minutes you talk.Minutes TalkedTotal Long DistanceTelephone Bill The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillVariable Cost Per UnitMinutes TalkedPer MinuteTelephone Charge The cost per long distance minute talked is constant.For example,10 cents per minute.The McGraw-Hill

10、 Companies,Inc.,2000Irwin/McGraw-HillTotal Fixed Cost Your monthly basic telephone bill probably does not change when you make more local calls.Number of Local CallsMonthly Basic Telephone Bill The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillFixed Cost Per UnitNumber of Local Calls Monthly Basic

11、 Telephone Bill per Local CallThe average cost per local call decreases as more local calls are made.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillCost Classifications for Predicting Cost BehaviorBehavior of Cost(within the relevant range)CostIn TotalPer UnitVariableTotal variable cost changes

12、Variable cost per unit remainsas activity level changes.the same over wide rangesof activity.FixedTotal fixed cost remainsFixed cost per unit goesthe same even when thedown as activity level goes up.activity level changes.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillCost BehaviorFixed costs a

13、re usually characterized by:a.Unit costs that remain constant.b.Total costs that increase as activity decreases.c.Total costs that increase as activity increases.d.Total costs that remain constant.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillFixed costs are usually characterized by:a.Unit cos

14、ts that remain constant.b.Total costs that increase as activity decreases.c.Total costs that increase as activity increases.d.Total costs that remain constant.Cost Behavior The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillCost BehaviorVariable costs are usually characterized by:a.Unit costs that

15、decrease as activityincreases.b.Total costs that increase as activity decreases.c.Total costs that increase as activity increases.d.Total costs that remain constant.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillVariable costs are usually characterized by:a.Unit costs that decrease as activity

16、increases.b.Total costs that increase as activity decreases.c.Total costs that increase as activity increases.d.Total costs that remain constant.Cost Behavior The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Linearity Assumption and the Relevant RangeActivityTotal CostEconomistsCurvilinear Co

17、st Function The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillActivityTotal CostEconomistsCurvilinear Cost FunctionAccountants Straight-Line Approximation(constant unit variable cost)The Linearity Assumption and the Relevant Range The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillActivityTotal C

18、ostRelevantRangeThe Linearity Assumption and the Relevant RangeAccountants Straight-Line Approximation(constant unit variable cost)EconomistsCurvilinear Cost FunctionA straight line closely approximates a curvilinear variable cost line within the relevant range.The McGraw-Hill Companies,Inc.,2000Irw

19、in/McGraw-HillTypes of Fixed CostsFixed CostsDiscretionaryMay be altered in the short-term by current managerial decisionsCommittedLong-term,cannot be reduced in the short term.ExamplesDepreciation on Buildings and EquipmentExamplesAdvertising and Research and Development The McGraw-Hill Companies,I

20、nc.,2000Irwin/McGraw-HillTrend Toward Fixed CostsIncreased automation.Increase in salaried knowledge workers who are difficult to train and replace.ImplicationsManagers are more“locked-in”with fewer decision alternatives.Planning becomes more crucial because fixed costs are difficult to change with

21、current operating decisions.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Example:Office space is available at a rental rate of$30,000 per year in increments of 1,000 square feet.As the business grows more space is rented,increasing the total cost.Fixed Costs and Relevant RangeContinue The Mc

22、Graw-Hill Companies,Inc.,2000Irwin/McGraw-HillRent Cost in Thousands of Dollars 0 1,000 2,000 3,000 Rented Area(Square Feet)03060Fixed Costs and Relevant Range90 Relevant RangeTotal cost doesnt change for a wide range of activity,and then jumps to a new higher cost for the next higher range of activ

23、ity.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillHow does this type of fixed cost differ from a step-variable cost?Step-variable costs can be adjusted more quickly and.The width of the activity steps is much wider for the fixed cost.Fixed Costs and Relevant Range The McGraw-Hill Companies,Inc

24、.,2000Irwin/McGraw-HillA mixed costhas both fixed and variablecomponents.Mixed Costs Consider thefollowing electric utility example.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillFixed MonthlyUtility ChargeVariable Utility ChargeActivity(Kilowatt Hours)Total Utility CostMixed Costs XYTotal mixe

25、d cost The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillTotal mixed cost Y=a+bXFixed MonthlyUtility ChargeVariable Utility ChargeActivity(Kilowatt Hours)Total Utility CostMixed Costs XYThe total mixed cost line can be expressed as an equation:Y=a+bXWhere:Y=the total mixed costa=the total fixed co

26、st(thevertical intercept of the line)b=the variable cost per unit ofactivity(the slope of the line)X=the level of activity The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillFixed MonthlyUtility ChargeVariable Utility ChargeActivity(Kilowatt Hours)Total Utility CostTotal mixed cost Y=a+bXMixed Cost

27、s bXaXY The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Analysis of Mixed CostsEngineering ApproachAccount AnalysisScattergraph MethodLeast-Square Regression MethodHigh-Low Method The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillAccount AnalysisEach account is classified as eithervariable

28、 or fixed based on the analysts knowledge of how the account behaves.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillEngineering EstimatesCost estimates are based on an evaluation of production methods,and material,laborand overhead requirements.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hi

29、llWiseCo recorded the following production activity and maintenance costs for two months: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 High-Low MethodUnitsCostHigh activity level9,000 9,700$Low activity lev

30、el5,000 6,100 Change4,000 3,600$The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill Unit variable cost =Changein costChange in unitsUnitsCostHigh activity level9,000 9,700$Low activity level5,000 6,100 Change4,000 3,600$The High-Low Method The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillUnitsCo

31、stHigh activity level9,000 9,700$Low activity level5,000 6,100 Change4,000 3,600$The High-Low Method Unit variable cost =$3,600 4,000 units=$0.90 per unit The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillUnitsCostHigh activity level9,000 9,700$Low activity level5,000 6,100 Change4,000 3,600$The H

32、igh-Low Method 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,Inc.,2000Irwin/McGraw-Hill Unit variable cost =$3,600 4,000 units=$0.90 per unit Fixed

33、 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+$0.90X UnitsCostHigh activity level9,000 9,700$Low activity level5,000 6,100 Change4,000 3,600$The High-Low Method The McGraw-Hill Co

34、mpanies,Inc.,2000Irwin/McGraw-Hill If sales salaries and commissions are$10,000 when 80,000 units are sold and$14,000 when 120,000 units are sold,what is the variable portion of sales salaries and commission?a.$0.08 per unitb.$0.10 per unit c.$0.12 per unitd.$0.125 per unitThe High-Low Method The Mc

35、Graw-Hill Companies,Inc.,2000Irwin/McGraw-Hill If sales salaries and commissions are$10,000 when 80,000 units are sold and$14,000 when 120,000 units are sold,what is the variable portion of sales salaries and commission?a.$0.08 per unitb.$0.10 per unit c.$0.12 per unitd.$0.125 per unitThe High-Low M

36、ethod$4,000 40,000 units =$0.10 per unitUnitsCostHigh level120,000 14,000$Low level80,000 10,000 Change40,000 4,000$The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill If sales salaries and commissions are$10,000 when 80,000 units are sold and$14,000 when 120,000 units are sold,what is the fixed po

37、rtion of sales salaries and commissions?a.$2,000b.$4,000 c.$10,000d.$12,000The High-Low Method The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill If sales salaries and commissions are$10,000 when 80,000 units are sold and$14,000 when 120,000 units are sold,what is the fixed portion of sales salari

38、es and commissions?a.$2,000b.$4,000 c.$10,000d.$12,000The High-Low MethodTotal cost=Total fixed cost+Total variable cost$14,000=Total fixed cost+($0.10 120,000 units)Total fixed cost=$14,000-$12,000Total fixed cost=$2,000 The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Scattergraph MethodPlo

39、t the data points on a graph(total cost vs.activity).0 1 2 3 4*Total Cost in1,000s of Dollars10200*Activity,1,000s of Units ProducedXY The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Scattergraph MethodDraw a line through the data points with about anequal numbers of points above and below t

40、he line.0 1 2 3 4*Total Cost in1,000s of Dollars10200*Activity,1,000s of Units ProducedXY The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Scattergraph MethodEstimated fixed cost=$10,0000 1 2 3 4*Total Cost in1,000s of Dollars10200*Activity,1,000s of Units ProducedXYThe slope of this line is

41、the variable unit cost.(Slope is the change in total cost for a one unit change in activity).The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Scattergraph MethodSlope =Change in costChange in unitsHorizontal distance is the change in activity.0 1 2 3 4*Total Cost in1,000s of Dollars10200*Acti

42、vity,1,000s of Units ProducedXYVertical distance is the change in cost.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HilllAccountants and managers may use computer software to fit a regression line through the data points.lThe cost analysis objective is the same:Y=a+bxLeast-Squares Regression Meth

43、odLeast-squares regression also provides a statistic,calledthe adjusted R2,that is a measure of the goodnessof fit of the regression line to the data points.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-Hill 0 1 2 3 4Total Cost10200Activity*Least-Squares Regression MethodR2 is the percentage of th

44、e variationin total cost explained by the activity.R2 for this relationship is near100%since the data points arevery close to the regression line.XY The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Contribution FormatTotalUnitSales Revenue100,000$50$Less:Variable costs60,000 30 Contribution m

45、argin40,000$20$Less:Fixed costs30,000 Net income10,000$The contribution margin format emphasizes cost behavior.Contribution margin covers fixed costsand provides for income.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillThe Contribution FormatComparison of the Contribution Income Statement with

46、 the Traditional Income Statement Traditional ApproachContribution Approach (costs organized by function)(costs organized by behavior)Sales100,000$Sales100,000$Less cost of goods sold70,000 Less variable expenses60,000 Gross margin30,000$Contribution margin40,000$Less operating expenses20,000 Less f

47、ixed expenses30,000 Net income10,000$Net income10,000$Used primarily forexternal reporting.Used primarily bymanagement.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillDirect Costs and Indirect CostsDirect costslCosts that can beeasily and conveniently traced to a unit of product or other cost ob

48、jective.lExamples:direct material and direct laborIndirect costslCosts cannot be easily and conveniently traced to a unit of product or other cost object.lExample:manufacturing overhead The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillCost Concepts for Decision Making A relevant cost is a cost th

49、at differs between alternatives.12 The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillIdentifying Relevant CostsCosts that can be eliminated(in whole or in part)by choosing one alternative over another are avoidable costs.Avoidable costs are relevant costs.Unavoidable costs are never relevant and i

50、nclude:Sunk costs.Future costs that do not differ between the alternatives.The McGraw-Hill Companies,Inc.,2000Irwin/McGraw-HillIdentifying Relevant CostsSunk cost-a cost that has already been incurred and that cannot be avoided regardless of what a manager decides to do.The McGraw-Hill Companies,Inc