Manajemen Biaya 03.ppt

COST MANAGEMENT

Don R. Hansen Maryanne M. Mowen

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Chapter Three

Activity Cost Behavior

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Learning Objectives  Define and describe fixed, variable, and mixed

costs.  Explain the use of resources and activities and

their relationship to cost behavior.  Separate mixed costs into their fixed and variable

components using the high-low method, the scatterplot method, and the method of least squares. PPT 3 -3

Learning Objectives (continued)  Evaluate the reliability of the cost formula.  Explain how multiple regression can be used to

assess cost behavior  Discuss the use of managerial judgment in

determining cost behavior.

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Cost Behavior Fixed Cost Behavior $

Variable Cost Behavior $

Relevant Range

Activity

Activity

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The Behavior of a Mixed Cost Linearity Assumption Total Costs $Cost Fixed Costs

Variable Costs

Number of Units Produced

Y = F + VX PPT 3 -6

Basic Terms Activity capacity is the ability to perform activities. Practical capacity is the efficient level of activity performance. Resources are economic inputs that are consumed in performing activities.

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Types of Fixed Resources  Flexible Resources  Committed Resources  Discretionary Fixed Costs

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Flexible Resources

Flexible resources are supplied as used and needed. They are acquired from outside sources, where the terms of acquisition do not require any long-term commitment for any given amount of the resource. Example:

Materials and energy

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Committed Resources

Committed resources are supplied in advance of usage. They are acquired by the use of either an explicit or implicit contract to obtain a given quantity of resource, regardless of whether the amount of the resource available is fully used or not. Committed resources may have unused capacity. Example:

Buying or leasing a building or equipment

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Committed Resources (continued)

Committed fixed expenses are costs incurred for the acquisition of long-term capacity. Example: Plant, equipment, warehouses, vehicles, and salaries of top employees

Discretionary fixed expenses are shorter-term committed resources. Example: The hiring of new receiving clerks

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Resource Relationships

The relationship between resources supplied and resources used is expressed by the following equation: Resources available = Resources used + Unused capacity

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Example Available orders = Orders used + Orders unused

7,500 orders = 6,000 orders + 1,500 orders

Fixed engineering rate

= $150,000/7,500 = $20 per change order

Variable engineering rate

= $90,000/6,000 = $15 per change order

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Example (continued) Cost of orders supplied = Cost of orders used + Cost of unused orders

= [($20 + $15) x 6,000] + ($20 x 1,500) = $240,000 Of course, the $240,000 is precisely equal to the $150,000 spent on engineers and the $90,000 spent on supplies.

The $30,000 of excess engineering capacity means that a new product could be introduced without increasing current spending on engineering.

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Step-Variable Costs Linearity Assumption

$Cost

Narrow Width

Number of Units Produced

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Step-Fixed Costs Linearity Assumption

$Cost

Wider Width

Number of Units Produced

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Methods for Measuring the Fixed and Variable Components of a Mixed Cost  The High-Low Method  Scatterplot Method  The Method of Least Squares

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High-Low Method: An Example Month January February March April May

Utility Costs $2,000 2,500 4,500 5,000 7,500

Units Produced 200 400 600 800 1,000

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The High-Low Method (continued) Y = F + VX Variable Cost Rate (V)= (Y2 - Y1)/(X2 - X1) V = ($7,500-$2,000)/(1,000-200) V = $5,500/800 V = $6.875 per unit

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The High-Low Method (continued) Y $7,500 F F

= F + VX = F + $6.875 (1,000) = $7,500 - $6,875 = $625

The cost formula using the high-low method is: Y = $625 + $6.875 (X)

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Utility Cost

Scatterplot Method

$8,000

6,000

Important: Cost function is only relevant within relevant range

. .

4,000

.

. .

Analyst can fit line based on his or her experience

2,000 200 0

400 600 800 Units Produced

1,000 PPT 3 -21

Nonlinear Relationship Activity Cost

*

*

*

* * 0

Activity Output PPT 3 -22

Upward Shift in Cost Relationship Activity Cost *

* 0

*

*

*

*

Activity Output PPT 3 -23

Presence of Outliers Activity Cost

* *

* 0

*

*

*

Activity Output PPT 3 -24

Least Squares Constant

250

Std Err of Y Est

299.304749934466

R squared

0.944300518134715

No. of Observations

5

Degrees of Freedom

3

X Coefficient(s)

6.75

Std Err of Coef.

0.9464847243

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Least Squares (continued)

The results gives rise to the following equation:

Utility Costs = $250 + ($6.75 x # of units produced)

R2 = .944, or 94.4 percent of the variation in setup costs is explained by the number of setup hours variable.

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Least Squares (continued) Using Confidence Intervals: Given: *T-value for sample size of 5 at 95% confidence level is 3.182 (two-tale test and 3 degrees of freedom) *Standard error of estimate for this sample at the 95% confidence level is 598.6

The confidence interval for 300 units is: TC = $250 + 6.75 (300) + (3.192 x $598.6) = $2275 + $1911

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Multiple Regression

TC = b0 + b1X1 + b2X2 + . . .

b0 = the fixed cost or intercept bi = the variable rate for the ith independent variable

Xi = the ith independent variable PPT 3 -28

Multiple Regression (continued) Month January February March April May June July August September October November December

MHrs 1,340 1,298 1,376 1,405 1,500 1,432 1,322 1,416 1,370 1,580 1,460 1,455

Summer 0 0 0 0 1 1 1 1 1 0 0 0

Utility Cost $1,688 1,636 1,734 1,770 2,390 2,304 2,166 2,284 1,730 1,991 1,840 1,833 PPT 3 -29

Multiple Regression (continued) Constant

243.1115

Std Err of Y Est

55.5083

R squared

0.9672

No. of Observations

12

Degrees of Freedom

9

X Coefficient(s)

1.0972

510.4907

Std Err of Coef.

0.2102

32.5490

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Multiple Regression (continued)

The results gives rise to the following equation:

Utilities cost = $243.11 + $1.097(MH) + $510.49(Summer)

R2 = 0.967, or 96.7 percent of the variation in utilities cost is explained by the machine hours and summer variables.

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Cost Behavior and Managerial Judgment

Some Tips  



Use past experience Try to confirm results with operating personal Use common sense to confirm statistical studies

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End of Chapter 3

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