CN10HO - Determining How Costs Behave Chapter 10 2009...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
2009 Foster School of Business Cost Accounting L.DuCharme 1 Determining How Costs Behave Chapter 10
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2009 Foster School of Business Cost Accounting L.DuCharme 2 Overview 1) Assumptions 2) Model: Y = a + bX 3) Determinates of Fixed vs. Variable costs 4) Cost Estimation Industrial Engineering Conference Method Account Analysis Quantitative Analysis: 5) Non-linear cost functions
Background image of page 2
2009 Foster School of Business Cost Accounting L.DuCharme 3 Two assumptions frequently used in cost-behavior estimation 1. Changes in total costs can be explained by changes in the level of a single activity. 2. Cost behavior can adequately be approximated by a linear function of the activity level within the relevant range.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2009 Foster School of Business Cost Accounting L.DuCharme 4 Cost Function What is a cost function? It is a mathematical expression describing how costs change with changes in the level of an activity.
Background image of page 4
2009 Foster School of Business Cost Accounting L.DuCharme 5 Cost Function—variable cost La Playa Hotel offers an airline three alternative cost structures to accommodate its crew overnight: 1. $60 per night per room usage y = $60 x The slope of the cost function is $60.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2009 Foster School of Business Cost Accounting L.DuCharme 6 Cost Function $0 $5,000 $10,000 $15,000 $20,000 0 100 200 300 x = Number of rooms y = Cost
Background image of page 6
2009 Foster School of Business Cost Accounting L.DuCharme 7 Cost Function—fixed cost 2. $8,000 per month y = $8,000 $8,000 is called a constant or intercept. The slope of the cost function is zero.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2009 Foster School of Business Cost Accounting L.DuCharme 8 Cost Function $0 $5,000 $10,000 $15,000 $20,000 0 100 200 300 x = Number of rooms y = Cost
Background image of page 8
Foster School of Business Cost Accounting L.DuCharme 9 Cost Function—mixed cost 3. $3,000 per month plus $24 per room This is an example of a mixed cost. y
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/02/2009 for the course ACCTG 311 taught by Professor Ducharme during the Spring '08 term at University of Washington.

Page1 / 35

CN10HO - Determining How Costs Behave Chapter 10 2009...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online