Account analysis method of cost estimation, Cost Accounting

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.

Posted Date: 2/5/2013 4:06:33 AM | Location : United States







Related Discussions:- Account analysis method of cost estimation, Assignment Help, Ask Question on Account analysis method of cost estimation, Get Answer, Expert's Help, Account analysis method of cost estimation Discussions

Write discussion on Account analysis method of cost estimation
Your posts are moderated
Related Questions

Tlie subphylum is called Uniramia because of the presence of unbranched appendages. These animals have non-jointed mandibles, uubranched appendages without any palps. They have

Distribution and Selling Cost Budget This is the forecast of all costs incurred in distributing and selling the company's product throughout the budget period. This is closel

how to calculate total costing in weighted average method

The following information is for the third quarter of this year: Planned Actual Production 92,000 units 87,000 units Direct labor hours 506,800 DL hrs 380,000 DL hrs Fixed manuf

describe the procedures involved in payroll labour cost accounting

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or mainta

Zero Based Budgeting It is referred to also like priority based budgeting. It is a cost advantage approach budgeting where it is assumed that the cost allowance is Zero for a

Support Department Cost Allocations. Riverside Furniture Company manufactures unfinished furniture for sale to retailers. Riverside has two support departments, Maintenance and Hu

Superior Door Company sells pre-hung doors to home builders. The doors are sold for $60 each. Variable costs are $42 per door and fixed costs total $450,000 per year. The company i