Part3：Cost behavior analysis.ppt

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1、PartThreeCostBehaviorAnalysisCostBehaviorCostbehavioristhemannerinwhichacostchangesassomerelatedactivitychangesAnunderstandingofcostbehaviorisnecessarytoplanandcontrolcostsArelevantrangeistherangeoverwhichweareinterestedinthecost’sbehaviorCOSTBEHAVIORANALYSISDefinition:Th

2、estudyofhowspecificcostsrespondtochangesinthelevelofbusinessactivitySomecostschange;othersremainthesameHelpsmanagementplanoperationsandmakedecisionsAppliestoalltypesofbusinessesandentitiesCOSTBEHAVIORANALYSISContinuedStartingpointismeasuringkeybusinessactivitiesActivityle

3、velsmaybeexpressedintermsofSalesdollars(inaretailcompany)Milesdriven(inatruckingcompany)Roomoccupancy(inahotel)Danceclassestaught(byadancestudio)COSTBEHAVIORANALYSISContinuedManycompaniesusemorethanonemeasurementbaseForanactivityleveltobeuseful:Changesinthelevelorvolumeof

4、activityshouldbecorrelatedwithchangesincostCOSTBEHAVIORANALYSISContinuedTheactivitylevelselectediscalledtheactivity(orvolume)indexIdentifiestheactivitythatcauseschangesinthebehaviorofcostsAllowscoststobeclassifiedaccordingtotheirresponsetochangesinactivityas:VariableCosts

5、FixedCostsMixedCostsCOSTBEHAVIORANALYSISVARIABLECOSTSCoststhatvaryintotaldirectlyandproportionatelywithchangesintheactivitylevelIftheactivitylevelincreases10percent,totalvariablecostsincrease10percentIftheactivityleveldecreasesby25percent,totalvariablecostswilldecreaseby2

6、5percentCOSTBEHAVIORANALYSISVARIABLECOSTS-ContinuedVariablecostsalsoremainconstantperunitateverylevelofactivityExamplesofvariablecostsincludeDirectmaterialanddirectlaborforamanufacturerSalescommissionsforamerchandiserGasolineinairlinesandtruckingcompaniesCOSTBEHAVIORANALY

7、SISVARIABLECOSTS-ContinuedExample:ContinuedStep-VariableCostsActivityCostTotalcostremainsconstantwithinanarrowrangeofactivity.Step-VariableCostsActivityCostTotalcostincreasestoanewhighercostforthenexthigherrangeofactivity.COSTBEHAVIORANALYSISFIXEDCOSTSCoststhatremaint

8、hesameintotalregardlessofchangesintheactivitylevel.Perunitcostvariesinverselywithactivity:Asvolu