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1、(本科）会计专业英语教案Chapter 10教学目标知识目标：Explain the definitionof costUnderstand the different of all kinds of cost能力目标：Use high-low analysis to separate the fixed and variable elements of total costs Explain the structure of linear functions and equations.素质目标：Calculate profit or loss by using variable costi
2、ng and absorption costing教学重点Understand the different of all kinds of costUse high-low analysis to separate the fixed and variable elements of total costs教学难点Calculate profit or loss by using variable costing and absorption costing教学手段结合理论与案例小组讨论教学学时2课时教 学 内 容 与 教 学 过 程 设 计注 释Chapter 10 Cost Behavio
3、r Analysis理论知识Topic 1: Cost Classification1. General Cost Classifications(1)Manufacturing Cost Direct material Direct material is all of the physical items built into a product. It is rolled into the total cost of goods produced, which is then subdivided into the cost of goods sold (which appears in
4、 the income statement) and ending inventory (which appears in the balance sheet). A company may buy direct materials from suppliers, create them on-site, or buy them from its own subsidiaries. Direct Labor Direct labor is production or services labor that is assigned to a specific product, cost cent
5、er, or work order. When a business manufactures products, direct labor is considered to be the labor of the production crew that produces goods, such as machine operators, assembly line operators, painters, and so forth. When a business provides services, direct labor is considered to be the labor o
6、f those people who provide services directly to customers, such as consultants and lawyers. Generally, a person who is charging billable time to a customer is working direct labor hours. Manufacturing OverheadManufacturing overhead, the third element of manufacturing cost includes all costs of manuf
7、acturing except direct materials and direct labor. Manufacturing overhead includes items such as indirect materials; indirect labor; maintenance and repairs on production equipment; heat and light, property taxes, depreciation, and insurance on man fracturing facilities. A company also incurs costs
8、for heat and light property taxes, insurance, depreciation and so forth associated with its selling and administrative functions, but these costs are not included as part of manufacturing overhead. Only those costs associated with operating the factory are included in manufacturing overhead. Across
9、large numbers of manufacturing companies, manufacturing overhead averages about 16 % of sales revenues. （2）Nonmanufacturing Costs Nonmanufacturing costs are often divided into two categories: selling costs and administrative costs. Selling costs include all costs that are incurred to secure customer
10、 orders and get the finished product to the customer. Examples of selling costs include advertising, shipping, sales travel, sales commissions, sales salaries, and costs of finished goods warehouses. 2. Product Costs and Period Costs(1) Product CostProduct cost refers to the costs used to create a p
11、roduct. These costs include direct labor, direct materials, consumable production supplies, and factory overhead. Product cost can also be considered the cost of the labor required to deliver a service to a customer. In the latter case, product cost should include all costs related to a service, suc
12、h as compensation, payroll taxes, and employee benefits.The cost of a product on a unit basis is typically derived by compiling the costs associated with a batch of units that were produced as a group, and dividing by the number of units manufactured. The calculation is:(Total direct labor + Total d
13、irect materials + Consumable supplies + Total allocated overhead) / Total number of units= Product unit cost (2) Period Cost A period cost is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets. A period cost is more closely associated with the passage of time than
14、with a transactional event. Since a period cost is essentially always charged to expense at once, it may more appropriately be called a period expense. This type of cost is not included within the cost of goods sold on the income statement. Instead, it is typically included within the selling and ad
15、ministrative expenses section of the income statement. Examples of period costs are: selling expenses; advertising expenses; travel and entertainment expenses.3. Cost Classifications for Predicting Cost Behavior(1) Variable Cost Variable cost is a cost that varies in relation to changes in the volum
16、e of activity. The variable cost concept can be used to model the future financial performance of a business, as well as to set minimum price points. The most common variable costs are: Direct materials: since the cost of materials are charged to expense when the associated products are sold. Commis
17、sions: since the sales staff earns commissions when sales transactions are completed. Billable labor: since wages associated with billable hours are charged to expense when the associated sales transactions are completed. Piece rate labor: where employees are paid based on the number of units produc
18、ed. Credit card fees: where a fee is not incurred unless a customer uses a credit card to pay for a purchase. To calculate total variable costs, the formula is:Total quantity of units produced Variable cost per unit = Total variable cost(2) Fixed Cost A fixed cost is a cost that does not vary in the
19、 short term, irrespective of changes in production or sales levels, or other measures of activity. A fixed cost is a basic operating expense of a business that cannot be avoided, such as a rent payment. The concept is used in financial analysis to find the breakeven point of a business, as well as t
20、o determine product pricing.4. Cost Classification for Assigning Costs to Cost Objects(1) Direct Cost A direct cost is a cost that can be clearly associated with specific activities or products. These costs are commonly used in incremental decision making, where the sales manager needs to know the d
21、irect cost of a product in order to ensure that a one-time sale transaction can be made at a price that exceeds the total of all direct costs. (2) Indirect Cost Indirect costs are costs that are not directly associated with a single activity, event, or other cost object. Such costs are frequently ag
22、gregated into an overhead cost pool and allocated to various activities, based on an allocation method that has a perceived or actual linkage between the indirect cost and the activity. 5. Cost Classifications for Decision Marking(1) Differential Cost and Revenue Differential cost is the difference
23、between the cost of two alternative decisions, or of a change in output levels. The concept is used when there are multiple possible options to pursue, and a choice must be made to select one option and drop the others. The concept can be particularly useful in step costing situations, where produci
24、ng one additional unit of output may require a substantial additional cost. Differential revenue is the difference in sales that will be generated by two different courses of action. The concept is commonly used when evaluating which of two (or more) investments to make in a business. The fallacy in
25、 using the differential revenue concept is that it pays no attention to the differential profit or cash flows generated by the various decisions. Profits or cash flows are vastly more important than revenue, since they contribute to the financial health of a business.(2) Opportunity Cost Opportunity
26、 cost is the cost of not selecting the next best choice when investing resources in an activity. Opportunity cost can be used to weigh the merits of various capital investment opportunities. For example, you have $1,000,000 and choose to invest it in a product line that will generate a return of 5%.
27、 If you could have spent the money on a different investment that would have generated a return of 7%, then the 2% difference between the two alternatives is the foregone opportunity cost of this decision.(3) Sunk Cost A sunk cost is a cost that an entity has incurred, and which it can no longer rec
28、over by any means.Topic 2: Cost BehaviorCost behavior refers to the sensitivity of total costs of activity inputs to changes in the levels of activity output (activity volume). Here the activity output (volume may be measured in terms of units of production or sales, hours worked, miles traveled, pa
29、tients seen students enrolled or any other appropriate measure of the activity of an organization. the range of output or sales over which cost behavior patterns remain unchanged is called the relevant range.1. Variable Cost Variable costs were discussed briefly in topic 1. We will summarize that di
30、scussion here by using the example of tasty donuts. Example 10-1 Tasty donuts direct material cost is a variable cost. As the company sells more donuts muffins and sweet rolls, the total cost of the ingredients for these goods increases in direct proportion to the number of items sold. Moreover, the
31、 quantities of beverages sold and paper products used by customers also increase in direct proportion to the number of bakery items sold. As a result, the costs of beverages and paper products are also variable costs.Exhibit 10-1 displays a graph of tasty donuts direct-material cost. As the graph sh
32、ows, total variable cost increases in proportion to the activity level (or cost driver). When activity triples, for example, from 50,000 dozen items to 150,000 dozen items, total direct-material costs will triple from $55,000 to $165,000. However, the variable cost per unit remains the same as activ
33、ity changes. The total direct-material cost incurred per dozen items sold is constant at$1.1 per dozen. The exhibit 10-2 illustrates this point. The variable cost per unit also is represented in the graph in panel 1 of exhibit 10-l as the slope of the cost line. To summarize, as activity changes, to
34、tal variable cost increases in direct proportion to the change in activity level, but the variable cost per unit remains constant.Exhibit10-1 Graph of Total Direct-Material CostTotal direct-material cost(food ingredients, beverages, paper products)Slop is variable cost per unit of activity, $1.10 pe
35、r dozen bakery items$165,000$110,00$55,00000$50,0000$100,000 0$150,0000 Exhibit10-2 Tabulation of Direct-Material CostActivity(or cost direct)Direct-Material Cost per Dozen Bakery Items SoldTotal Direct-Material Cost50,000$1.10$55,000100,0001.10110,000150,0001.10165,0002. Fixed CostFixed costs are c
36、osts incurred for a period of time, which are constant in total over the relevant range. Fixed costs include things like rent, insurance premiums, depress of the factory building, supervisors salaries, leasing charges for cars used by the sales force, and property taxes.Example 10-2 X Company exampl
37、e above, if the number of chairs produced doubles, the depreciation of the factory building do not change. Say the depreciation is $50,000 for one month, and the relevant range is from 0 to 5,000 chairs, then the depreciation charge per chair for different units will be as follows:Number of chairs p
38、roducedDepreciation charge per chair1$50，000105，0001005001 000502 00025Fixed cost can be represented by a linear equation as below:F= total variable cost In our example for X Company, the relationship that describes the total depreciation of factory building is F=$50,000The graph of fixed cost is al
39、so a straight line, it doesnt change with volume or activity. Exhibit 10-3 illustrates fixed cost behavior:Exhibit10-3 Fixed Cost BehaviorTotal fixed costLevel of activityCost 3. Mixed Cost Although here are several costs which are either purely variable or purely fixed many costs are mixed or semi-
40、variable. The utility has both a fixed and a variable component, such as telephone and electricity often have a fixed cost element such as line rental or a standing charge which has to be paid irrespective of usage. In addition, there is also a cost per unit used. Those costs that contain both fixed
41、 element and variable elements are called mixed costs or semi-variable costs. Example 10-3 We also use the example of tasty donuts. The cost of operating delivery trucks is a semi-variable cost for tasty donuts, Inc. These costs are graphed in exhibit 10-4. As the graph shows, the companys delivery-
42、truck costs have two components. The fixed- cost component is $3,000 per month, which is the monthly rental payment paid under the lease contract for the delivery trucks. The monthly rental payment is constant, regardless of the level of activity (or cost driver). The variable-cost component consist
43、s of the costs of gasoline, oil, routine maintenance, and tires. These costs vary with activity, since greater activity levels result in more deliveries. The distance between the fixed - cost line (dashed line) and the total- cost line in exhibit10-4 is the amount of variable cost. For example, at a
44、n activity level of 100,000 dozen bakery items, the total variable-cost component is $10,000.The slope of the total-cost line is the variable cost per unit of activity. For tasty Donuts, the variable cost of operating its delivery trucks is $10 per dozen bakery items sold.Exhibit10-4 Cost analysis T
45、otal cost of Operating delivery trucksActivity, or cost driver(dozens of bakery itemssold per month) Slope is variable costPer unit of activity, $.10 per dozen bakery itemsVariable cost Component Total cost lineFixed cost component50,000100,000150,000$3,000$10,000$20,0004. Mixed Cost Separation Ther
46、e are a variety of procedures that can be used to separate the fixed and variable components. The most widely used methods including the high-low method, the scatter graphs method and the regression analysis method.(1) The High-low MethodIn the high-low method the semi variable-cost approximation is
47、 computed using exactly two data points. The high and low activity levels are chosen from the available data set. Follow the steps below to estimate the fixed and variable elements of semi-variable costs: Review records of costs in previous periods:Select the period with the highest activity level.S
48、elect the period with the lowest activity level. Determine the following:Total cost at high activity levelTotal cost at low activity levelTotal units at high activity levelTotal units at low activity level Calculate the following:Total cost at high activity level total cost at level activity levelTotal unit at high activity level total unit a