Your Turn: Estimating Cost Functions Using the High-Low Method Problem 1

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來自 University of Virginia 的課程

Managerial Accounting Fundamentals

41 個評分

University of Virginia

Managerial Accounting Fundamentals

41 個評分

This course will teach you the fundamentals of managerial accounting including how to navigate the financial and related information managers need to help them make decisions. You'll learn about cost behavior and cost allocation systems, how to conduct cost-volume-profit analysis, and how to determine if costs and benefits are relevant to your decisions. By the end of this course, you will be able to: - Describe different types of costs and how they are represented graphically; - Conduct cost-volume-profit analyses to answer questions around breaking even and generating profit; - Calculate and allocate overhead rates within both traditional and activity-based cost allocation systems; - Distinguish costs and benefits that are relevant from those that are irrelevant for a given management decision; - Determine a reasonable course of action, given the financial impact, for a given management decision.

從本節課中

MANAGERIAL ACCOUNTING AND COST BEHAVIOR

Welcome to the course -- we're glad you're here! During this first week, we'll distinguish managerial from financial accounting, including the financial and related information managers need to help them make decisions. We'll then move on to cost behavior including different types of costs, their classifications, and how these classifications help with decision-making. From there, we'll show how to use a scatterplot and the high-low method to estimate cost functions. Let's get started!

Different Costs for Different Purposes2:05

Different Costs in More Detail7:32

Cost Behavior3:49

Using a Line to Represent Cost Behavior2:29

Estimating Cost Functions Using Scatter Plots5:36

Your Turn: Estimating Cost Functions Using Scatter Plots Problem 15:23

Your Turn: Estimating Cost Functions Using Scatter Plots Problem 24:54

Estimating Cost Functions Using the High-Low Method5:52

Your Turn: Estimating Cost Functions Using the High-Low Method Problem 17:17

Your Turn: Estimating Cost Functions Using the High Low Method Problem 25:56

Important Caveats10:12

與講師見面

Luann J. Lynch
Almand R. Coleman Professor of Business Administration
Darden School of Business

Now I'm going to give you an opportunity to practice

estimating cost functions using the high, low method.

Let's return to the two examples that we used in the prior Your Turn segment on

scatter plots.

But this time, we will use the high, low method to estimate the cost functions.

Here is the first example.

We have a scatter plot of observations where costs are on the vertical or

y-axis and the number of units are on the horizontal, or the x-axis.

And remember with the high, low method, you'll need to first,

pick a typical low activity observation and a typical high activity observation.

Now it looks here, like there's several that we could pick that would be typical.

I'm looking at low activity here, maybe this one or this one or

this one or this one.

They seem to be falling in that typical range, so

that we're all working with the same observations.

Let me suggest that we pick this one.

950,000 in costs and

10,000 in the number of units.

As our typical low activity observation and

we could pick a number of different ones for the high activity, as well.

Let's just go with this one as our typical high activity level observation.

2,975,000 in costs and

that's 55,000 units.

So, we'll use that as our typical high activity observation.

So that would be your first step, we've taken care of that.

Second, you'll need to calculate variable costs using those two observations.

Then third, you'll calculate fixed cost by subtracting variable cost from

total cost using either of these two observations.

And then fourth, you'll use that to write the equation and why.

So, take a few minutes.

Give it a try, then come back.

We'll see how you did and I'll meet you at the Lightboard.

Hello again, here we're back at the Lightboard.

We're going to talk a little bit about the high, low method.

How did it go for you?

I suspect that you did pretty well, but we'll give it a try and see what happens.

Now remember with the high, low method, the first thing we're going to do is take

a typical low activity observation and a typical high activity observation.

And we did that before I turned you lose for you to take your turn and

we have decided on these low activity, and

high activity observations as representative of typical observations.

This was $950,000 in costs at

an activity level of 10,000 units.

And then our typical high activity level observation,

we chose $2,975,000 in costs

at an activity level of 55,000 units.

So, that was the first step we completed that together before you took your turn.

And then from there, you were off and running.

So, let's see what happens next.

The second step with the high, low method as you recall is now that

we've picked our high and our low activity observations,

we're going to calculate the variable cost per unit from those two observations.

So we're going to take the high activity level cost, subtract from the low activity

level cost and divide that by the difference in units.

Let's do that.

The typical high activity level

costs $2,975,000.

The typical low activity observation cost 950,000.

We divide that by the respective units, the high activity level 55,000 units and

the low activity level 10,000 units.

And we see that we're at a variable

cost of $45 per unit.

So, that was our second step.

Remember the first step, choosing the two observations.

Second step, calculating the variable cost per unit.

Then our third step is we're going to pick, either one of these two points.

Either the high or the low activity, it doesn't matter.

Each will work equally well and we're going to calculate our

fixed cost at that particular activity level by taking the total

cost of that level minus the variable cost of that level.

What's left will be the fixed price.

So, let's do the low activity level as our example.

Our total costs at this point are $950,000.

Of those 950,000, part are variable and part are fixed.

The variable portion is $45 per unit times the number of units.

Well, at this observation level, there's 10,000 units.

So total cost of 950,

variable cost of $450,000.

So, that means what's left over is our fixed cost.

$500,00 is our estimate of fixed cost.

Now incidentally, if we had chosen the high activity level to do

this calculation, we should see the same $500,00.

Let's prove that.

If we had taken $2,975,000 in total costs and

subtracted the variable cost at this point,

45 per unit times 55,000 units.

Then we would have, let's see.

This is not 450,000, it's 2,475.

45 times 55,000, 2,475.

So total cost at this point, 2,975.

Our variable cost, 2,475.

The difference, $500,000.

Makes sense, doesn't it?

Because the fixed cost should be the same at either of these activity levels.

Feeling good, we're going to go to the last step.

We're going to use all of this work.

To write the equation of the line or the cost function.

Our slope, variable cost per unit,

45 times the number of units plus our fixed cost of $500,000.

Straightforward.

Great job.

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