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Unformatted text preview: ACCO 330 – Cost Accounting CostVolumeProfit Analysis 1 Course outline 1 . Regression Analysis Framework 2. CVP Methodology ACCO 330 – Cost Accounting CostVolumeProfit Analysis 2 1. Framework Regression analysis provides confidence intervals (range) when estimating costs This method can be incorporated in cost volumeprofit analysis ACCO 330 – Cost Accounting CostVolumeProfit Analysis 3 2.CVP Methodology A. Net income determination when costs are unknown When sales quantities and selling prices are known; the only uncertainty is the estimated total cost Sales will be the known constant Total cost will be the known variable Distribution of net income around the best estimate of income will be the same for the distribution of total cost ACCO 330 – Cost Accounting CostVolumeProfit Analysis 4 2.CVP Methodology A. Net income determination when costs are unknown Contract to sell 50,000 units at $4 per unit Cost function based on 23 observations Cost equation = $2.50 per unit + $70,000 per period Standard error is $1,500 Best estimate of income? Range of income expected with 95% confidence? ACCO 330 – Cost Accounting CostVolumeProfit Analysis 5 2.CVP Methodology A. Net income determination when costs are unknown C o n t r a c t t o s e ll 5 0 , 0 0 0 u n it s a t $ 4 p e r u n it C o s t f u n c t io n b a s e d o n 2 3 o b s e r v a t io n s C o s t e q u a t io n = $ 2 . 5 0 p e r u n it + $ 7 0 , 0 0 0 p e r p e r io d S t a n d a r d e r r o r is $ 1 , 5 0 0 B e s t e s t im a t e o f in c o m e ?...
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This note was uploaded on 01/24/2011 for the course ACCO 330 taught by Professor Mastromonaco during the Fall '10 term at Concordia Canada.
 Fall '10
 Mastromonaco
 Cost Accounting

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