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

Straight line method, Assume that $140,000 of Denham Springs school dostric...

Assume that $140,000 of Denham Springs school dostrict 8% bonds are sold on the bond issue date for $128,598 interest is payable semiannually, and the bonds mature in 15 years. The

Sgtatement of Cash Flow, “The statement of cash flows is the easiest of the...

“The statement of cash flows is the easiest of the basic financial statements to prepare because you know the answer before you start. You compare the beginning and ending balances

Calculate the equivalent annual cost, A plant is considering the replacemen...

A plant is considering the replacement of a piece of equipment in its materials handling system with a new piece. If the company's cost of capital is 10%. Should the present asset

Accounting for job order costing - direct materials, Accounting for Job Ord...

Accounting for Job Order Costing - Direct Materials Direct materials (i) Dr Stores ledger control Account Cr Cash Account - for cash purchasers              X (ii) D

Estimate fixed overhead variances, Estimate Fixed Overhead Variances ...

Estimate Fixed Overhead Variances Referring to data, we can estimate the fixed overhead variances as given below: Budget for December 2003;

Calculate capacity ratio and efficiency ratio, Woodall Ltd has two producti...

Woodall Ltd has two production departments, X and Y. For month 2, the company budgets its overhead costs as:   X Y Variable overhead

Batch costing, Batch Costing This is a kind of job costing that is uti...

Batch Costing This is a kind of job costing that is utilized when production consists of limited repetitive work and definite number of item manufactured in one batch.  A batc

Calculate the tax base of the interest received, Prepare answers to each of...

Prepare answers to each of the following questions.  Assume a tax rate of 30%. (i) Harry Ltd has a balance of prepaid rent in the balance sheet amounting to $100 000 as at 30 Ju

Cash flow statements, The balance sheet and income statement for Bingle Ltd...

The balance sheet and income statement for Bingle Ltd is presented to you as follows: Balance Sheet Extract as at 30 June 2012 with comparatives

Classification, what is the classification of cost & how it is done?

what is the classification of cost & how it is done?

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