Steps of graphic analysis, Managerial Accounting

Assignment Help:

Steps of Graphic Analysis

There are four steps in using graph paper to study cost-volume relationships:

Step 1: Compute the scale which you will use:

Volume is considered as the independent variable and will be graphed on the horizontal axis. Cost is considered as the dependent variable and will be graphed on the vertical axis. The scales on two axes do not comprise to be similar. Though, on each axis one block should symbolize the same quantity of change as every other block of the similar size on that axis. Each scale must be large adequate to allow analysis, and small adequate to allow the graphing of all available data and predictable data estimates.

Step 2: Plot the accessible cost-volume data:

Determine the volume specified for one of the data points on the horizontal axis. Now draw an imaginary vertical line from that point. Find the associated cost on the vertical axis and draw an imaginary horizontal line from that point. The point where two lines intersect symbolizes the cost for the given volume. (When you do not feel comfy with imaginary lines you might draw dotted lines to put the intersection.) Replicate this step for each data point.

Step 3: Fix a straight line to the data:

In this part of text, all data points will fall on a straight line. All that you contain to do to fit a straight line is attach to the data points. Most of the analysts use regression analysis to fit a straight line whenever all points do not fall on the line.

Step 4: Predict the cost for a specified volume:

Draw an imaginary vertical line from offered volume to the point where it intersects the straight line which you fit to the data points. Then move horizontally till you intersect the vertical axis. That point is the graphic approximation of the cost for the specified volume of the item.


Related Discussions:- Steps of graphic analysis

The simplex method, The Simplex Method In the graphical solution the op...

The Simplex Method In the graphical solution the optimum solution is always associated with a corner (or extreme) point of the solution space. The simplex method is based funda

Homework, IF net income totaled $18,000 for one year, beginning assets were...

IF net income totaled $18,000 for one year, beginning assets were $100.000 and ending assets were $140,000, then Return on Assets for the year as a percentage will be?

Define material usage variance, Material usage variance Difference amon...

Material usage variance Difference among standard quantity of material and actual quantity used is the material usage variance. This variance arises due to: Economic use of

Transportation problem-solution, Transportation Problem-Solution Soluti...

Transportation Problem-Solution Solution of the Transportation Problem: The fundamental steps of the transportation method are: Step 1:       Determine a preliminary b

accounts payable turnover ratio , Accounts Payable Turnover Ratio is a sh...

Accounts Payable Turnover Ratio is a short-term liquidity measure which is used to calculate the rate at which a company pays off its suppliers. Accounts payable turnover ratio is

What is sunk cost, What is Sunk cost A cost has been incurred in the p...

What is Sunk cost A cost has been incurred in the past or sunk in the past and is not relevant to the particular decision making, is a sunk cost. If it is decided to replac

Illustrate thedifference between a fixed and flexible budget, Difference be...

Difference between a fixed and flexible budget Fixed budget A fixed budget remains the same irrespective of changed situations. It remains inflexible even if volume of

Labor standard, Describe the impact of different types of standards on moti...

Describe the impact of different types of standards on motivations and specifically,the likely effect on motivation of adopting the labor standard recommended?

#titleCORPORATE GOVERNANCE, Final paper: CAPM and Capital Structure (2500 w...

Final paper: CAPM and Capital Structure (2500 words max) Reflect on the course materials with specific focus on the last two papers (Sharpe; Modigliani & Miller). Synthesize the k

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