Managerial Accounting Creating Value in a Dynamic Business Environment 11E-Hilton, Solution Manual

Managerial Accounting Creating Value in a Dynamic Business Environment 11E-Hilton,Solution Manual

CHAPTER 6

ACTIVITY ANALYSIS, COST BEHAVIOR, AND COST ESTIMATION

Learning Objectives

6-1. Explain the relationships between cost estimation, cost behavior, and cost prediction.

6-2. Define and describe the behavior of the following types of costs: variable, step-variable, fixed, step-fixed, semivariable (or mixed), and curvilinear.

6-3 Explain the importance of the relevant range in using a cost behavior pattern for cost prediction.

6-4. Define and give examples of engineered costs, committed costs, and discretionary costs.

6-5 Describe and use the following cost estimation methods: account classification, visual fit, high-low, and least-squares regression.

6-6. Describe the multiple regression, engineering, and learning-curve approaches to cost estimation.

6-7 Describe some problems often encountered in collecting data for cost estimation.

6-8. Perform and interpret a least-squares regression analysis with a single independent variable (appendix).

Chapter Overview

I. Cost Behavior Patterns
A. Types of costs
1. Variable costs
2. Step-variable costs
3. Fixed costs
4. Step-fixed costs
5. Semivariable (mixed) costs
6. Curvilinear cost
B. The relevant range
C. Using Cost Behavior Patterns to Predict Costs
D. Cost Categories and Structures
1. Engineered costs
2. Committed costs
3. Discretionary costs

II. Cost Estimation
A. Methods
1. Account-classification
2. Visual-fit
3. High-low
4. Least-squares regression
a. Equation Form of least-squares regression line
b. Independent and dependent variables
c. Economic plausibility and goodness of fit
5. Multiple regression
B. Data Collection Problems
1. Missing data
2. Outliers
3. Mismatched time periods
4. Trade-offs in choosing the time period
5. Allocated and discretionary costs
6. Inflation
C. Big Data
1. Characteristics
a. Volume
b. Velocity
c. Variety
2. Potential Uses
D. Engineering Method of Cost Estimation

III. Effects of Learning on Cost Behavior
A. Learning curves
B. Experience curves