财务管理教材 The Nature of Cost.ppt

The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Manufacturing Cost Concepts Financial Accounting Cost is a measure of resources used or given up to achieve a stated purpose. Managerial Accounting Product costs are the costs a company assigns to units produced. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The ProductThe Product Direct Materials Direct Labor Manufacturing Overhead Manufacturing Costs The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Direct 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 automobile The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Direct Labor Those labor costs that can be easily traced to individual units of product. Example: Wages paid to automobile assembly workers The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Manufacturing costs that cannot be traced directly to specific units produced. Manufacturing Overhead Examples: Indirect labor and indirect materials Wages 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 cleaning supplies used in the automobile assembly plant. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Classifications of Costs Direct Materials Direct Labor Manufacturing Overhead Prime Cost Conversion Cost Manufacturing costs are often combined as follows: The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Nonmanufacturing Costs Marketing 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., 2000 Irwin/McGraw-Hill Product Costs Versus Period Costs Product costs include direct materials, direct labor, and manufacturing overhead. Period costs are not included in product costs. They are expensed on the income statement. Inventory Cost of Good Sold Balance Sheet Income Statement Sale Expense Income Statement The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Cost Classifications for Predicting Cost 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., 2000 Irwin/McGraw-Hill Total Variable Cost Your total long distance telephone bill is based on how many minutes you talk. Minutes Talked Total Long Distance Telephone Bill The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Variable Cost Per Unit Minutes Talked Per Minute Telephone Charge The cost per long distance minute talked is constant. For example, 10 cents per minute. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Total Fixed Cost Your monthly basic telephone bill probably does not change when you make more local calls. Number of Local Calls Monthly Basic Telephone Bill The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Fixed Cost Per Unit Number of Local Calls Monthly Basic Telephone Bill per Local Call The average cost per local call decreases as more local calls are made. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Cost Classifications for Predicting Cost Behavior The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Cost Behavior Fixed costs are 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., 2000 Irwin/McGraw-Hill Fixed costs are 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. Cost Behavior The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Cost Behavior Variable costs are usually characterized by: a.Unit costs that decrease as activity increases. 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., 2000 Irwin/McGraw-Hill Variable costs are usually characterized by: a. Unit costs that decrease as activity 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., 2000 Irwin/McGraw-Hill The Linearity Assumption and the Relevant Range Activity Total Cost Economists Curvilinear Cost Function The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Activity Total Cost Economists Curvilinear Cost Function Accountants Straight-Line Approximation (constant unit variable cost) The Linearity Assumption and the Relevant Range The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Activity Total Cost Relevant Range The Linearity Assumption and the Relevant Range Accountants Straight-Line Approximation (constant unit variable cost) Economists Curvilinear Cost Function A straight line closely approximates a curvilinear variable cost line within the relevant range. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Types of Fixed Costs Fixed Costs Discretionary May be altered in the short-term by current managerial decisions Committed Long-term, cannot be reduced in the short term. Examples Depreciation on Buildings and Equipment Examples Advertising and Research and Development The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Trend Toward Fixed Costs Increased automation. Increase in salaried knowledge workers who are difficult to train and replace. Implications Managers are more “locked-in” with fewer decision alternatives. Planning becomes more crucial because fixed costs are difficult to change with current operating decisions. The McGraw-Hill Companies, Inc., 2000 Irwin/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 Range Continue The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Rent Cost in Thousands of Dollars 0 1,000 2,000 3,000 Rented Area (Square Feet) 0 30 60 Fixed Costs and Relevant Range 90 Relevant Range Total cost doesnt change for a wide range of activity, and then jumps to a new higher cost for the next higher range of activity. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill How 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., 2000 Irwin/McGraw-Hill A mixed cost has both fixed and variable components. Mixed Costs Consider the following electric utility example. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Fixed Monthly Utility Charge Variable Utility Charge Activity (Kilowatt Hours) Total Utility Cost Mixed Costs X Y Total mixed cost The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Total mixed cost Y = a + bX Fixed Monthly Utility Charge Variable Utility Charge Activity (Kilowatt Hours) Total Utility Cost Mixed Costs X Y The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Fixed Monthly Utility Charge Variable Utility Charge Activity (Kilowatt Hours) Total Utility Cost Total mixed cost Y = a + bX Mixed Costs bX a X Y The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Analysis of Mixed Costs Engineering Approach Account Analysis Scattergraph Method Least-Square Regression Method High-Low Method The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Account Analysis Each account is classified as either variable or fixed based on the analysts knowledge of how the account behaves. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Engineering Estimates Cost estimates are based on an evaluation of production methods, and material, labor and overhead requirements. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill WiseCo 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 Method The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Unit variable cost = Changein cost Change in units The High-Low Method The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The High-Low Method Unit variable cost = $3,600 4,000 units = $0.90 per unit The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The High-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., 2000 Irwin/McGraw-Hill 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 Total cost = Fixed cost + Variable cost (Y = a + bX) Y = $1,600 + $0.90X The High-Low Method The McGraw-Hill Companies, Inc., 2000 Irwin/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 unit b. $0.10 per unit c. $0.12 per unit d. $0.125 per unit The High-Low Method The McGraw-Hill Companies, Inc., 2000 Irwin/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 unit b. $0.10 per unit c. $0.12 per unit d. $0.125 per unit The High-Low Method $4,000 40,000 units = $0.10 per unit The McGraw-Hill Companies, Inc., 2000 Irwin/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 salaries and commissions? a. $ 2,000 b. $ 4,000 c. $10,000 d. $12,000 The High-Low Method The McGraw-Hill Companies, Inc., 2000 Irwin/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 salaries and commissions? a. $ 2,000 b. $ 4,000 c. $10,000 d. $12,000 The High-Low Method The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Scattergraph Method Plot the data points on a graph (total cost vs. activity). 0 1 2 3 4 * Total Cost in 1,000s of Dollars 10 20 0 * * * * * * * * * Activity, 1,000s of Units Produced X Y The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Scattergraph Method Draw a line through the data points with about an equal numbers of points above and below the line. 0 1 2 3 4 * Total Cost in 1,000s of Dollars 10 20 0 * * * * * * * * * Activity, 1,000s of Units Produced X Y The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Scattergraph Method Estimated fixed cost = $10,000 0 1 2 3 4 * Total Cost in 1,000s of Dollars 10 20 0 * * * * * * * * * Activity, 1,000s of Units Produced X Y The slope of this line is the variable unit cost. (Slope is the change in total cost for a one unit change in activity). The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Scattergraph Method Slope = Change in cost Change in units Horizontal distance is the change in activity. 0 1 2 3 4 * Total Cost in 1,000s of Dollars 10 20 0 * * * * * * * * * Activity, 1,000s of Units Produced X Y Vertical distance is the change in cost. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill lAccountants and managers may use computer software to fit a regression line through the data points. lThe cost analysis objective is the same: Y = a + bx Least-Squares Regression Method Least-squares regression also provides a statistic, called the adjusted R2, that is a measure of the goodness of fit of the regression line to the data points. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill 0 1 2 3 4 Total Cost 10 20 0 Activity * * * * * * * * * * Least-Squares Regression Method R2 is the percentage of the variation in total cost explained by the activity. R2 for this relationship is near 100% since the data points are very close to the regression line. X Y The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Contribution Format The contribution margin format emphasizes cost behavior. Contribution margin covers fixed costs and provides for income. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill The Contribution Format Used primarily for external reporting. Used primarily by management. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Direct Costs and Indirect Costs Direct costs lCosts that can be easily and conveniently traced to a unit of product or other cost objective. lExamples: direct material and direct labor Indirect costs lCosts cannot be easily and conveniently traced to a unit of product or other cost object. lExample: manufacturing overhead The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Cost Concepts for Decision Making A relevant cost is a cost that differs between alternatives. 1 2 The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Identifying Relevant Costs Costs 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 include: Sunk costs. Future costs that do not differ between the alternatives. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Identifying Relevant Costs Sunk 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., 2000 Irwin/McGraw-Hill Differential Costs and Revenues Costs and revenues that differ among alternatives. Example: You have a job paying $1,500 per month in your hometown. You have a job offer in a neighboring city that pays $2,000 per month. The commuting cost to the city is $300 per month. Differential revenue is: $2,000 $1,500 = $500 The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Differential Costs and Revenues Costs and revenues that differ among alternatives. Differential revenue is: $2,000 $1,500 = $500 Differential cost is: $300 Example: You have a job paying $1,500 per month in your hometown. You have a job offer in a neighboring city that pays $2,000 per month. The commuting cost to the city is $300 per month. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Opportunity Costs The potential benefit that is given up when one alternative is selected over another. Example: If you were not attending college, you could be earning $15,000 per year. Your opportunity cost of attending college for one year is $15,000. The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Sunk Costs Sunk costs cannot be changed by any decision. They are not diffe