* A cost object is a thing or activity for which we measure costs. Cost objects include such things as individual products, product lines, projects, customers, departments, and even the entire company. * Direct cost: a cost that can be directly traced to a cost object and is incurred for the benefit of a particular cost object * Indirect cost: a cost that is incurred for the benefit of more than one cost object and therefore cannot be easily and economically traced to a particular cost object * Prime costs: direct materials and direct labour

* Conversion costs: direct labour and manufacturing overhead

Classifications| Applications| Cost Terms|
Relevance| Decision-making| Relevant cost vs. irrelevant cost| Behaviour| Costs estimation| Fixed cost vs. variable cost| Traceability| Costs assignment| Direct cost vs. indirect cost| Function| Cost determination| Manufacturing cost vs. non-manufacturing cost| Controllability| Performance evaluation| Controllable cost vs. uncontrollable cost|

* Traceability: the ability to trace in an economically feasible way by means of a cause and effect relationship * Tracing: is the actual assignment of costs to a cost object using an observable measure of the resources consuming the cost object * Direct tracing: is the process of identifying and assigning costs that are specifically or physically associated with a cost object to that cost object. * Costs that are physically associated with a product (Direct costs) are the easiest to trace, since we can visually observe and measure the relationship * Driver Tracing: is the use of drivers to assign costs to cost objects. This is less exact than direct tracing * Drivers: are observable casual factors that measure a cost object’s resource consumption * Cost allocation – costs that cannot be easily traced (i.e. some indirect costs) are “allocated”. This is the least accurate method of...

...Chapter 8: Cost Estimation
Strategic Role of Cost Estimation
* Cost Estimationthe development of a well-defined relationship b/t a cost object and its cost drivers for the purpose of predicting the cost
* Facilitates strategic mgmt is 2 ways
* Helps predict future costs
* Helps identify key cost drivers for a cost object and which driver is most useful
* Using Cost Estimation to Predict future costs
* Strategic mgmt requires accurate estimates for the following:
* To facilitate strategy development and implementation
* To facilitate value-chain analysis
* To facilitate target costing and pricing
* To facilitate effective performance measurement, evaluation, and compensation
* Cost Estimation for Different Types of Cost Drivers
* Activity-Based, Volume-Based, Structuralusually long-term impact, Executional
* The effect on total cost of experience is nonlinearcosts decrease w/ increase manufacturing experience
* Relationship between the structural cost driver, scale, and total cost is nonlinear
* Scaleused to describe the manufacture of similar products that differ in size
* Using Cost Estimation to...

...Javier Jorge
Dr. Moss
Managerial Analysis
April 11th, 2012
Project 3
We are given a linear regression that gives us an equation on the relationship of Quantity on Total Cost. As stated in the project, the regression data is very good with a relatively high R2, significant F, and t-values but we can’t use this model to estimate plant size. When we perform a simple eye test on the residual plot for Q a trend seems to form from positive to negative and back to positive. When we also fit a linear trend line to the normal probability plot we can also see a pattern. This may indicate that the errors are not normally distributed; the effect is an increase in the tendency to reject the null hypothesis (type 1 error). But the easiest way to see that the model is not the best for this data is when you assign trend lines to the data.
Linear fit is ok, but you can see that the data is too spread out.
Polynomial to the 3rd order is a better fit, but we can do better.
Polynomial to the 2nd order is the best fit, the data is pretty “snug”.
Attached you will find the regression analysis for all three models with the 2nd order model having the best results with a high R2 and a very significant F with a better looking normal probability plot and Q/Q2 residuals distributed more randomly. The model that is produced with standard errors in parenthesis is:
TC = | 347.9484 | - 12.4285Q | + 0.356795Q2 |
| (77.19129) | (5.50019) | (0.089795) |...

...leLECTURE 5a
Cost Estimation/Segregation Techniques
Cost estimation is a term used to describe the measurement of historical cost so as to be able to predict future costs for management decision making. That is, historical information is analyzed to provide estimates on which to base future operational To do cost estimation, it is important for the Accountants to be able to ascertain the activity level as well ascost drivers which exert main influence on the company activity. A cost driver is any factor whose change causes a change in the total cost of the operations of an activity. Some examples of cost drivers are:
(a) direct labour hours
(b) machine hours
(c) Units of output and
(d) Number of production runs
In some cases, there are mixed costs. That is, such costs have both fixed and variable elements that would need to be segregated.
METHOD OF SEGREGATING MIXED COSTS INTO FIXED COST AND VARIABLE COSTS
Mixed costs can be separated into their fixed and variable elements, using a number of methods which include:
(i) The accounts classification method
(ii) The high-low method
(iii) The scatter graph
(iv) The linear regression analysis
(v) The multiple regression analysis
Account Classification Method
This...

...Introduction
This assignment focuses on the costfunctions of the Dutch Railways. In this tutorial will be an estimated costfunction developed for the Nederlandse Spoorwegen (NS). This costfunction (expressed in Dutch Guilders) is based on the period of Year 1951 till Year 1993. This due to certain developments that made it more difficult to come to a good approach of a costfunction. Based on the costfunction, developed in this tutorial, there will be an answer provided on the question whether is it efficient to allow competition on the tracks.
First we will define a costfunction related to the NS. Then we will describe the important variables. After defining the costfunction, the relevance of the costfunction will be explained.
When the relevance is known, the right data can be used and the dataset can be interpreted. This interpretation is useful to make an appropriate estimation of the costfunction related to the provided data. After analysing the data, there will be a costfunction (Cobb-Douglas method) developed based on regression of the dataset. Finally, this tutorial will be concluded.
Costfunction analysis is very helpful in providing the...

...Algebra I Cost-Revenue Business Project
This project is designed for you to demonstrate your understanding of systems of linear equations. Before starting, read the entire project outline and requirements. During this project you are to do the following: 1) Pair up with a partner and create a business that sells one commodity of your choice (points for creativity). 2) Create a Market Research Survey that will be used to survey 50 students to help you discover what potential customers are looking for in the product your group will create and sell. The survey must include a minimum of three questions. 3) Conduct the survey. 4) Create a list of fixed costs – items and prices. Consider items such as a store, equipment, furniture, advertisement, etc. Use the survey results to revise the fixed cost list if needed. Include the total fixed cost. 5) Create a list of variable costs. With each variable cost include the dollar figure calculated per unit. Once again, use the survey results to revise the variable costs list if needed. Sate the total variable cost. 6) Using the survey results and the total variable cost determine the product price. 7) Write the COSTfunction and the REVENUE function. 8) Solve the system of equations algebraically using the substitution method AND the linear combination method in order to...

...at the gas stations around your town reflects the market price.
Supply, demand, and time are key elements of market price.
Factors that affect price
Costs
* Fixed Cost- Costs that remain constant over a period of time regardless of sales volume.
Insurance, Rent/Mortgage, Salaries &Depreciation
* Variable cost- Costs that vary based on sales volume or changes in business needs.
Commissions, Advertising, Office Supplies & Utilities
* Competition
* Supply and Demand
* Fashion
* New technology
* Price
Internal and external company factors affect a company's pricing decisions. Internal factors include the company's marketing objectives, marketing mix strategy, costs, and organizational considerations. External factors include the nature of the market, demand, competition, and other environmental elements.
Define the various types of pricing strategies and objectives available to global marketers.
Ans 2 Pricing strategies for products or services encompass three main ways to improve profits. These are that the business owner can cut costs or sell more, or find more profit with a better pricing strategy. When costs are already at their lowest and sales are hard to find, adopting a better pricing strategy is a key option to stay viable.
There are various types of strategies:-
a) Cost plus pricing
b)...

...Accounting
Review Exam 3
Chapter 4
Statement of Cash Flows (SCF):
is an essential component within the set of basic financial statements.
Is presented for each period for which results of operations are provided.
Operating Activities:
inflows and outflows of cash related to the transactions entering into the determination of net operating income.
Cash inflows include cash received from:
1. Customers from the sale of goods or services.
Ex./ collection of cash from customers
2. Interest and dividends from investments
Cash outflows include cash paid for:
1. The purchase of inventory.
2. Salaries, wages, and other operating expenses.
Ex./ payment of employee salaries,
3. Interest on debt.
Ex./ Payment of interest on a note payable.
4. Income taxes
Net cash flows from operating activities:
Difference between the inflows and outflows
Depreciation expenses
Reduces net income but not cash
Direct Method of Reporting
the cash effect of each operating activity is reported directly in the SCF.
Directly related to principal revenue-generating activities
CFO = cash receipts from operating activities
(-) cash payments from operating activites
Indirect Method
cash flow from operating activities is derived indirectly by starting with reported net income and adding or subtracting items to convert that amount to a cash basis.
Starts with net income and works backwards to convert to cash
Net Income
+ Depreciation...