ACCT2522 Management Accounting 1 Session 1, 2013 Tutorial Week 3 – Cost basics
Overall Theme We will explore fundamental assumptions of cost functions and discuss the relationships between cost behaviour, cost estimation and cost prediction. The concept of cost driver analysis and its application to cost estimation and cost management will also be discussed. We will also describe how to estimate cost behaviour using managerial judgment, engineering methods and other quantitative techniques.
Desired Learning Outcomes and Essential Reading
Langfield-Smith, K., H. Thorne, and R. W. Hilton (2012). Management Accounting 6e: Information for Managing and Creating Value, 6th ed, McGraw-Hill Australia Pty Ltd. (Hereafter referred to as LS)…show more content… Suggest a potential cost driver 2. Classify the cost as manufacturing or non-manufacturing
Self Study Questions and Solutions (complete in your own time) 1. 2. 3. 4. LS, Chapter 2, Self-Study problem 1. LS, Chapter 2, Review Question 2.7 LS, Chapter 3, Question 3.34. Mowen, Chapter 3, Question 3.10. (Note: You are not required to run a regression, the output table is provided below.
Self Study Questions and Solutions (complete in your own time)
1. LS, Chapter 2, Self-Study problem 1. Solution is on p.61-62 with the following amendments: 4) Answer should a, and h. (Sales and marketing are often used interchangeably.) 7) Answer should be a, and NOT b. (The word-processing equipment is used for administration purposes and should not be inventorised.) 9) Answer should be a, and either g or h. (If the new product packaging is designed to attract customers’ attention and increase sales, the cost of material can also be considered a marketing cost.)
2. LS, Chapter 2, Review Question 2.7 When analysing cost behaviour the ‘level of activity’ refers to the level of work performed in the organisation. The activity generally causes the cost and, for this reason, the level of activity is often referred to as the level of cost driver. Activity can be expressed in many different ways, including units produced, number of machine hours, number of direct labour hours, number of transactions, kilometres driven, kilowatts used, pages printed, number of set-ups,