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1/19/2011
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Topic B
Cost Estimation and CostVolume
Profit (CVP) Analysis
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Agenda
•
Cost Estimation
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CostVolumeProfit (CVP Analysis)
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Cost Estimation
Cost Estimation
•
Cost estimation is the process of developing a well
defined relationship between a cost object and its
cost driver(s)
•
The purpose is to generate
accurate cost
estimates
that can be used in the planning process
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The Importance of Cost Estimation
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To help predict future costs that enable:
Strategic positioning
Value chain analysis
Target costing and life cycle costing
Performance measurement, evaluation and
compensation
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To identify and understand cost drivers and cost
behaviour
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Steps in Cost Estimation
1.
Define the Cost Object to Be Estimated
2.
Determine the Cost Drivers
3.
Collect Consistent and Accurate Data
4.
Graph the Data
5.
Select and Employ the Estimation Method
6.
Assess the Accuracy of the Cost Estimate
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Linear Cost Estimation Methods
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HighLow Method
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Regression Analysis
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Work Measurement
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Discussion Questions
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Textbook Problem 833
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Textbook Problem 847
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This note was uploaded on 04/23/2011 for the course RSM 322 taught by Professor Lisaharvey during the Spring '11 term at University of Toronto Toronto.
 Spring '11
 LisaHarvey

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