University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

27

Pages:

2
Author:

stud_ice13

The material here offers an overview of key concepts in cost estimation, cost behavior, and managerial accounting, focusing on the use of Excel for regression analysis, the distinction between absorption and variable costing, and the calculation of contribution margin and breakeven points. Key Points: 1. Excel Functions for Cost Estimation: o Intercept and Slope: These Excel functions help estimate total fixed costs and variable cost per unit through least-squares regression. The INTERCEPT function estimates total fixed costs, while the SLOPE function estimates variable costs per unit. 2. Scatter Diagrams in Excel: o You can use Excel to create scatter diagrams to visualize cost behavior, highlighting a dataset and using the Scatter chart option. Adding a trendline provides a line of best fit, which helps identify patterns in cost data. 3. Costing Methods: o Absorption Costing: This method includes both variable and fixed production costs in the product cost, aligning with GAAP requirements for external financial reporting. o Variable Costing: This method only includes variable costs in product costs, treating fixed overhead as a period expense. It's useful for internal decision-making but not allowed for GAAP-based reporting. 4. Income Statements and Costing Impact: o Different income statements are produced under each costing method. Absorption costing can inflate income when production exceeds sales because fixed overhead costs tied to unsold units are deferred to future periods as inventory. 5. Contribution Margin and CVP Analysis: o The contribution margin (selling price minus variable costs) is critical for cost-volume-profit (CVP) analysis, which helps companies determine breakeven points and predict the impact of sales volume changes on profits. 6. Break-even and Target Sales Calculations: o Breakeven point (in units or dollars) and target sales calculations rely on the contribution margin. For example, using the formula (FixedCosts+TargetIncome)/ContributionMarginRatio(Fixed Costs + Target Income) / Contribution Margin Ratio(FixedCosts+TargetIncome)/ContributionMarginRatio helps determine the required sales for achieving specific profit targets. Would you like further clarification on any of these concepts or specific guidance on using Excel for these tasks?