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

Stock will be selling , Atlanta Company stock is expected to follow an expo...

Atlanta Company stock is expected to follow an exponential growth rate. The relationship between the current stock price P0, future price PT after time T, and the continuously comp

Determine the estimated operating cost - high low method, 10) Mike Taylor, ...

10) Mike Taylor, the owner of Tennessee River Boat Rentals, is estimating the cost of operating his boat rental company next year. He expects to have 450 rentals during 200Z. The f

What is the cost of goods manufactured, information for the year ended Dece...

information for the year ended December 31, 2010: Direct labor $16,840 Direct material used 16,300 General and administrative expenses 14,240 Indirect production costs 16,780 Selli

Labour costs, Labour Costs Definition of Labour Cost A labour c...

Labour Costs Definition of Labour Cost A labour cost refers to all the costs incurred in compensating the human resources used in the production process to provide a us

Standard costs establish the minimum desirable costs, Standard Costs Establ...

Standard Costs Establish the Minimum Desirable Costs When actual costs incurred exceed or else are below the standard costs, we after that investigate the variances along with

Inventory valuation, How the FIFO, LIFO and AW problems can be solved?

How the FIFO, LIFO and AW problems can be solved?

Calculate discounted cash flow, The Integrated Management Project is to be ...

The Integrated Management Project is to be based on an organisation, a strategic business unit, or profit centre that has good potential for growth and development. The brief is to

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

Explanations on the correct fixation of selling pric, Explanations on the c...

Explanations on the correct fixation of selling price

Prepare the journal entries to record declaration, Unrecaptured Sec. 1250 G...

Unrecaptured Sec. 1250 Gain and 1231. Mr. Briggs purchased an apartment complex on January 10, 2011, for $2 million with 10% of the price allocated to land. He sells the complex on

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