Account analysis method of cost estimation, Cost Accounting

Assignment Help:

Account Analysis Method of Cost Estimation

By Utilizing account analysis, the accountant classifies and examines each ledger account like variable mixed or fixed. Into their variable and fixed components mixed accounts are broken down. They base these classifications on experience, inspection of cost behaviour for some past durations or intuitive feelings of the manager.

Example

Management has estimated of Shs.1,090 variable costs, of Shs.1,430 fixed costs to create 100 units employing 500 machine hours. As machine hours drives variable costs in our example, the variable cost stated like

After that we get the total cost equation like

Y = ,1430 +2.18 x

Whereas y = net cost

               x = number of machine hours

Utilizing for 550 machine hours

Net cost = Shs.1, 430 + Shs. 2.18 (550)

= 1,430 + 1,999

= Shs.2, 629

This analysis must find out whether any factors apart from the output machine hours are influencing net cost.

A danger in utilizing this method lies there is actually many managers may assume a cost's behaviour with no further analysis.  This is as like the method is highly subjective.


Related Discussions:- Account analysis method of cost estimation

How many bottles do they need to sell to breakeven, Denair Fine Wines, Inc....

Denair Fine Wines, Inc., is planning to bring out a higher-quality wine product than any currently available in Stanislaus county. They've decided on selling the blended, fortified

Measuring performance in organization, list and discus the problem encounte...

list and discus the problem encountered in adopting profit as a yardstick in measuring performance

Advantages and disadvantages of designing an ic, Discuss the advantages and...

Discuss the advantages and disadvantages of designing an IC using VHDL and synthesis compared with the traditional design approach using schematic capture, simulation and layout.

Which of the floowing is not capital budgeting decision, 1. when using the ...

1. when using the internal rate of return method to evaluate capital spending on a new project, the project will be accepted if the internal rate of return is equal to or greater t

Determine the interest expense is deductible, Assume the same facts as in 1...

Assume the same facts as in 1A above, except that the interest payment checks were placed on the shareholders' office on December 31, 2012. However, the shareholders are not in the

Market-based transfer price optimal, Under what conditions is a market-base...

Under what conditions is a market-based transfer price optimal?

Compute the estimated value of inventory stolen at kji, The following are t...

The following are three independent situations where the reporting entity for which financial statements are being prepared are underlined. Every company has a December 31, 2012 ye

Process costing, what is accounting treatment for material losses due to ab...

what is accounting treatment for material losses due to abnormal reasons

Cost of labor, The number of workdays varies from month to month due to the...

The number of workdays varies from month to month due to the number of weekdays, holidays, days of vacation, and sick leave taken in the month. The number of units produced in a mo

Determine the ratio of the sales, 1) Jodie received a $2000 college entranc...

1) Jodie received a $2000 college entrance scholarship. Nine month later Brian was awarded a $2100 academic proficiency scholarship for his outstanding grades in the first year of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd