The cost of the resources are estimated
Dividing cost on activity gives the average cost
per unit of activity
Can be costly and time consuming

3-ACCOUNTS ANALYSIS METHOD
Attempts to identify costs with various
activity pools and derive an average cost per
unit of the related cost driver
Example
How much total cost was incurred to attract new
customer?
How many new customers were attracted?
Divide cost by number of customers to get the cost per
new customer
Costly and not as reliable as statistical

4- Scattergraph and High-Low
method
1-Plot the data points on a graph (total cost vs
activity).
2-Draw a line through the data points with about
an equal numbers of points above and below
the line
.
3-Use one data point to estimate the total level of
activity and the total cost.
4-Make a quick estimate of variable cost per unit
and determine the cost equation.

Plot the data points on a graph
(total cost vs. activity).
0
1
2
3
4
*
Maintenance
Cost
1,000’s of
Dollars
10
20
0
*
*
*
*
*
*
*
*
*
Patient-days in 1,000’s
X
Y
THE SCATTERGRAPH METHOD

THE SCATTERGRAPH METHOD
Draw a line through the data points with about an
equal numbers of points above and below the line.
0
1
2
3
4
*
Maintenance
Cost
1,000’s of
Dollars
10
20
0
*
*
*
*
*
*
*
*
*
Patient-days in 1,000’s
X
Y

THE SCATTERGRAPH METHOD
Use one data point to estimate the total level of
activity and the total cost.
Intercept = Fixed cost: $10,000
0
1
2
3
4
*
Maintenance
Cost
1,000’s of
Dollars
10
20
0
*
*
*
*
*
*
*
*
*
Patient-days in 1,000’s
X
Y
Patient days = 800
Total maintenance cost = $11,000

THE SCATTERGRAPH METHOD
Make a quick estimate of variable cost per unit and
Make a quick estimate of variable cost per unit and
determine the cost equation.

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- Fall '18
- jane
- Accounting, $1,000, $1.25, $4,000, $2,000, $2,400