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The various methods of determining the cost function
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The various methods of determining
the cost function
Thank you
Account Classification Method
Reference
High-Low Method
Step 1: Classify each cost as variable or fixed based on judgment
Cost Function. https://study.curtincollege.edu.au/moodle2/course/view.php?id=302
Step 2: Add the costs you identified as variable costs(b)
Cost Estimation Method. http://www.unf.edu/~dtanner/dtch/dt_ch5.htm
Step 3: Add the costs you identified as fixed costs.(a)
Variable Costs:
Variable cost. http://www.investopedia.com/terms/v/variablecost.asp
Step 4: Plug your answers to steps 2 and 3 into the cost equation from Y=a+bX
Vary depending on a company's production volume; rise as production increases and fall as production decreases.
Step 1. Identify the high and low activity levels from the data.
Step 2. Calculate the variable cost per unit (b).
Step 3. Calculate the total fixed costs (a).
Step 4. State the results in equation form Y = a + bX.
Fixed Costs:
Remain the same regardless of production output.
Such as rent, advertising, insurance and office supplies
Outline
Conclusion
Introduction
Cost Function
- Introduction
Boogie Ltd
- Account Classification Method
- High-Low Method
- An organization-sells beach and surf wear clothing
- Explain:Cost Function
- Avoid making poor decisions to overprice the project
- Target market:18-30 years old
Benefits:
- Identify:Variable Costs&Fixed Costs
- Quickly calculate expenses and make choices on funding projects, choosing suppliers and other activities.
- Sales-online internationally&locally,through franchised outlets
- 2 main methods:
-Account Classification
-High-Low
- Want to enter the ski wear market
- Issues with the accounting system
- Conclusion
By: Xue Ma(Snowy)
Student ID:90007720