home Instagram The method of the highest and lowest points of production volume. Methods for dividing costs into variable and fixed. Definition of the cost function

The method of the highest and lowest points of production volume. Methods for dividing costs into variable and fixed. Definition of the cost function

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2.3. Reserve valuation

According to international standards for reserves include the following types assets:

 intended for sale in the course of the organization's activities;

 produced in the course of production for sale;

 used in the form of raw materials or materials in manufacturing process or the provision of services.

Stocks are accounted for by the following classification groups: goods, raw materials, materials, work in progress, finished products
induction.

As required international standards inventory should be valued at the lower of cost and net realizable value, which is the estimated selling price in normal conditions sales, net of projected costs of work and sales.

The method of estimating inventory depends on the applied accounting scheme. It is possible to use three schemes for inventory accounting using cost and physical meters:

1. Individual(by subject), in which the movement of each individual unit of stock is monitored.

2. natural value, at which control over the movement of stocks for individual items in value and physical terms is carried out.

3. cost, in which control is carried out as a whole for the entire volume of the stock only in terms of value.

The individual organization of accounting for the movement of stock allows you to get the most accurate assessment of them, however, this method is the most time-consuming.

Of the other two inventory accounting methods, one of the following inventory valuation methods is most commonly used:

 at the average cost;

 at the cost of first-time purchases (FIFO);

 at the cost of the latest purchases (LIFO).

Reserve valuation FIFO method is based on the assumption that material resources are used during the reporting period in the sequence of their purchase, i.e., the resources that are the first to enter production should be valued at the cost of purchases first in time, taking into account the value of assets listed at the beginning of the month. Inventory valuation is determined as the product of the amount of inventory remaining on the last reporting date by the cost
the bridge of the last deliveries. The use of this method makes it possible to obtain an estimate of reserves at the end of the reporting period, the most adequate to the current situation on the market for this reserve, since this estimate was formed at the price of the last purchases.

LIFO method is based on the opposite assumption to the FIFO method, i.e., the resources that are the first to enter production should be valued at the cost of the last (successively) by the time of purchases. Stock valuation is determined by multiplying the stock balance in physical terms by the cost of the first deliveries, taking into account the balance. The use of this method in inflationary conditions leads to an underestimation of stocks at the end of the reporting period, since the assessment is made at the actual cost of early purchases.

Reserve valuation average cost method is defined as the product of the quantity of stock at the end of the reporting period by its average price. The average price of a stock is defined as the quotient of dividing the value of the stock owned by the organization in the reporting period by the amount of stock owned
of the organization for the same period.

The use of various methods for estimating reserves leads to different financial indicators activities of the organization, so the choice of method should be based on a thorough analysis of the activities of the organization and recorded in its accounting policies.

3. COST AND BENEFITS ACCOUNTING AS A TOOL
MANAGEMENT DECISION-MAKING

3.1. Budgeting and budgeting in accounting,
the procedure for its implementation

Budget is the plan of an organization or a responsibility center, expressed in natural or monetary units to manage income, expenses and liquidity.

The budgeting system allows management to preliminarily evaluate the effectiveness of management decisions, optimally allocate resources between organizational units (responsibility centers), outline development paths and avoid a crisis situation in the activities of an economic entity. Its effectiveness determines the effectiveness of the organization.

The budgeting process is conditionally divided into the following stages:

1. Determining the goal to achieve which the development and implementation of the budget will be directed.

2. Identification of sources of information and the implementation of its collection.

3. Definition of a circle of users by the budget.

4. Determination of the budget structure.

5. Collection of information for the preparation of each section of the budget.

6. Direct execution of the budget.

Budgeting activities of different levels of management pursues the following goals:

 development of the concept of implementation (planning) of financial and economic activities for a certain period; optimization of income, costs and profits; profit coordination;

 communication - bringing plans to the heads of responsibility centers;

 Motivation of heads of responsibility centers to achieve the set goals;

 control and evaluation of the effectiveness of the work of the heads of responsibility centers by comparing the actual performance results with the normative ones;

 Identification of the need for financial resources and optimization of cash flows;

When implementing budgeting, adhere to the following main principles:

 flexibility is a constant adaptation to changes in the environment in which the organization operates;

 continuity involves "rolling" planning;

 communication is communication and integration of the efforts of all departments of the organization (everything must be interconnected and interdependent);

 iterativeness implies the creative nature of planning and the repeated elaboration of already drawn up sections of the plan;

 multivariance consists in the development of the best of the alternative possibilities for achieving the set goal;

 participation is the importance of the planning process itself in terms of involving all possible participants in it;

 Appropriateness is about reflecting real problems and self-assessment in the planning process.

The classification of budgets by planning volumes can be presented in the form of a hierarchical scheme (Fig. 5).

Rice. 5. Classification of budgets by planning objects

Budgets are developed both for the organization as a whole (free budget), and for its structural divisions or individual functions of activity (private budgets). On a time basis, they cover the fiscal year, broken down by quarters and months, based on continuous planning.

Table 4. General budget of the organization

	Types of budgets
Operational budget	Sales budget (turnover, volume of products sold)
	Inventory budget at the end of the planning period
	Raw material procurement budget
	Cost of sales budget
	Budget gross income
	Variable cost budget
	Fixed Cost Budget
	Profit and Loss Planning
The end of the table. four
Components of the General Budget	Types of budgets
financial budget	Budget capital investments
	Budget Money
	Forecast balance sheet

Operational budget reflects the current activities of responsibility centers and the organization as a whole.

financial budget is predictive information about financial condition organizations.

The operational budget begins to be developed from sales budget, since all other economic indicators organizations. This planning involves market research, determining the dynamics of demand, studying the strategies of competitors, etc. This budget is formed both “top-down” (direction based on market capacity, market share) and “bottom-up”, taking into account the demand for individual types of products and the needs of individual buyers.

Inventory and purchasing budgets is the calculation of the organization's need for material resources and development of measures to organize their purchases in the required amounts.

The profit and loss plan can be presented in the form of a table. 5.

Table 5. Profit and loss plan

Indicators	Responsibility Centers (separate view products) (), %	Total organization (), %
1. Sales volume
2. Cost of sales
3. Gross income
4. Variable costs
5. Marginal income (p. 3 - p. 4)
6. Fixed costs
7. Operational profit (page 5 – page 6)
8. Income and real estate tax
9. Net profit(p. 7 - p. 8)

When forming budgets for responsibility centers, a prerequisite is the use of the "zero balance" method, which assumes that budgets should be drawn up not on the basis of costs for the past period, but on the basis of planned activities.

The budget must be formed on the basis of one of the alternatives plan:

 pessimistic(should pursue a minimum goal and require the maximum reduction of available resources);

 probabilistic(should focus on achieving maximum goals with moderate use of resources);

 optimistic(should provide for the achievement of the maximum goal with the efficient use of all resources).

Prepared budgets must meet the following requirements:

1. Be challenging but achievable.

2. Only the real budget has the right to exist, and the shadow or emergency budget is not allowed.

3. Be a general plan in natural and monetary units.

4. Responsible for the execution of the budget should take part in its development.

5. Should be a kind of instruction for recording on accounting accounts.

6. Must remain unchanged during the budget period.

Depending on the purpose of comparison and analysis, budgets are divided into static and flexible.

Static budget calculated on a specific level of business activity of the organization. It reflects the very fact of the result achieved. With its help, the absolute values of indicators are compared and analyzed, both in monetary terms and in percentage terms.

Flexible budget is a budget adapted to different levels of sales volume. It takes into account changes in costs depending on changes in the volume of sales and is a dynamic basis for comparing the results achieved with the planned indicators.

3.2. Organization of cost-benefit accounting
in financial and management accounting

The basis of the organization of accounting production costs the following principles:

 Documentation of costs and their full reflection in the accounts of production;

 grouping of costs by objects of accounting and places of their occurrence;

 consistency of cost accounting objects with production cost calculation objects and actual cost accounting indicators with the plan;

 expediency of expanding the range of costs related to accounting objects for their intended purpose;

 localization of costs caused by the manufacture of certain products;

 separate reflection of costs according to current standards and deviations from these standards, as well as systematic accounting of changes in standards and their impact on production costs;

 Implementation of operational control over production costs and the formation of the cost of output.

In various industries, the object of cost accounting can be different calculation units (one product (order); 100 pairs of shoes or dishes; 10 kg of a product or other weight indicator, etc.).

The production process includes organically related and interdependent stages:

1. Cost accounting for production facilities and cost centers.

2. Calculating the cost of production.

In management accounting, as in financial accounting, the accounting for production costs and results is divided into the following accounting processes:

 accounting of the supply process;

 Accounting for the production process;

 Accounting for the implementation process.

3.3. Features of the managerial approach to the relationship
costs, revenues and profits with the volume of production

Understanding cost behavior is the key to making management decisions in an organization. Specialists who understand how costs behave are better able to predict cost changes in different production areas.

To determine the cost-volume relationship, i.e. to determine the component of fixed and variable costs per unit of output, you can use following methods:

 method based on entries in accounting registers;

 visual method;

 the method of the highest and lowest points, or the "mini-maxi" method;

 method of least squares.

Essence method based on entries in accounting registers, consists in the fact that accounting entries are analyzed by registers. In this case, each of the amounts related to the cost accounts is classified as fixed, variable or mixed costs. After that, their total amount is determined by analyzing work orders, supplier invoices, timesheets, etc. This method is laborious, rarely used, and can be used to attribute costs to various types.

visual method used when costs are mixed or when there is uncertainty about their behavior. Useful in this case can be observations that allow you to determine the dependence of costs and volume. Here, based on direct observation, an approximate graph of the behavior of mixed (unclear) costs and volume is built.

The method of the highest and lowest points, or the method of "mini–maxi" based on observing the magnitude of costs at maximum and minimum volumes production activities. Variable unit costs are defined here as follows:

The fixed costs are then determined by subtracting the variable costs at the appropriate volume from the total cost.

Then the following cost formula is drawn up:

W = P 2 + P 1  V,

Where W- expenses;

P 2 - fixed costs;

P 1 - variable costs per unit of production;

V- volume of production.

This method gives the most accurate information only in the area of relevance and may not give the desired results outside of it.

Using least squares method the direct relationship between the indicators under consideration is constructed so that the sum of the squared deviations of the distances from all points to the theoretical regression line would be minimal. To establish the relationship between costs and production volume, as well as the amount of costs, methods of mathematical statistics are used (for example, the least squares method). Here we use a direct relationship function that reflects the relationship between the dependent and independent variables, called regression equation. This equation has the following form:

y = a + bx,

Where y– dependent variable (total costs, mixed costs);

b- variable costs;

x- volume of production.

The essence of the method under consideration is that the sum of the squares of the actual deviations of the function at from the values found by the regression equation should be the smallest:

 (Y i – Y i J)  min,

Where Y i– actual value;

Y i J– calculated values calculated according to a given formula.

This condition leads to a system of normal equations, the solution of which allows us to determine the parameters of the regression equation:

xy = a  x + bx 2

y = na + bx,

Where n is the number of observations.

Analysis of the ratio "cost - volume - profit" (Cost - Volume - Profit), or "CVP-analysis" helps managers in the following cases:

 understand the relationship between the price of the product, direct costs per unit of output, the volume of fixed costs, mixed costs;

 trace the relationship between costs, production volume and profit.

Thus, the analysis of the ratio "costs - volume - profit" is a key factor in the process of making managerial decisions that relate to the issues of the range of products, production volume, type of marketing strategy, etc.

The CVP-analysis method is based primarily on determining marginal profit (the difference between sales proceeds and variable costs, that is, this is the amount sufficient to cover fixed costs and then make a profit).

Sales revenue, variable and fixed costs, and contribution margin can be expressed as a percentage.

The ratio of marginal profit to the amount of sales proceeds is called rate of marginal profit, which is calculated as follows:

This norm shows what effect the change in the amount of sales proceeds has on marginal profit.

Knowing the rate of contribution margin, you can determine the expected profit with an increase in production or sales.

Obviously, you can achieve an increase in profit by increasing marginal profit. This can be achieved in different ways:

 reduce the selling price and, accordingly, increase the volume of sales;

 increase fixed costs and increase sales;

 proportionally change variable, fixed costs and output volume.

"CVP analysis" is sometimes referred to as analysis critical point (dead point, break-even point or equilibrium point). It is understood as costs equal to the proceeds from the sale of all products, that is, this is the volume of sales at which the organization has neither profit nor loss. Three methods are used to calculate it:

1.Equation method. It is based on the fact that any financial result can be represented in the form of the following formulas:

Profit = Revenue - Variable Costs - Fixed Costs

Profit per unit of output =(Unit price x× Number of units – Variable unit costs X Number of Units - Total Fixed Costs) : Number of Units.

Another financial result can be represented as an equation

ax = bx + c+ 0, hence

Oh – in = With,

Where a- price of a unit of production;

in- variable costs;

With- the total amount of fixed costs;

0 - (zero) profit;

X- the break-even point of a unit of production.

2.Margin Method is a kind of method of equations.

As noted above, contribution margin equals revenue minus variable costs. Therefore, marginal profit per unit of output is equal to price minus unit variable costs (i.e., costs per unit of output).

The essence of this method follows from the concept of marginal profit, that is, it allows you to determine how many units of production must be sold in order to cover all fixed costs. This uses the following formula:

If the rate of marginal profit is known, then the break-even point is calculated as follows:

3.Graphic method gives a visual representation of the break-even point (BEP). Finding it comes down to building a comprehensive “costs – volume – profit” schedule.

The sequence of plotting (Fig. 6) is as follows:

 Draw a line of fixed costs on the chart, for which we draw a straight line parallel to the x-axis.

 We select any point on the abscissa axis, i.e. any volume value. Calculate for this point the value total costs(constant and variable) according to the formula

y = a + bx.

We build a straight line on the graph corresponding to this value.

 Again we select any point on the abscissa axis and for it we find the amount of proceeds from sales. We construct a straight line corresponding to this value.

 Find the break-even point on the chart. This is the intersection of the lines "total costs" and "revenue".

Rice. 6. Break Even Point Chart (BEP)

You can build another graph that immediately shows how profit changes with a change in output. It is called the profit margin chart (Fig. 7) and is built as follows:

 The value of fixed costs is plotted along the y-axis, provided that the volume of production is zero. This point will be in the loss zone.

 We calculate the expected amount of profit for a given value of production volume (it must be greater than the volume at the break-even point).

 We find the corresponding point on the graph, connect it with the point denoting the amount of fixed costs. The profit chart crosses the zero mark at a volume equal to the breakeven point volume. The vertical distance between these lines shows the expected loss or expected profit at different sales volumes.

R

is. 7. margin chart

The division of costs into variable and fixed is based on the behavior of costs.

Cost behavior is the nature of the change in costs depending on the level of business activity of the enterprise.

To describe the behavior of variable costs in management accounting, a special indicator is used - the cost response factor. The cost response coefficient characterizes the ratio between the rate of change in costs and the growth rate of business activity of the enterprise:

where Y is the growth rate of costs, %;

X - the growth rate of business activity of the enterprise,%.

The behavior of the total (fixed and variable) costs of the enterprise in general view can be represented by the following formula:

where U - total costs, rub.;

A - fixed costs, rubles;

c - variable costs per unit of production, rub.;

X is the volume of production in natural units of measure.

The correct division of costs can be achieved by observing, measuring actually incurred costs. In practice, they often use more simple method division of costs into fixed and variable - by the method of the highest and lowest points. Its essence lies in the fact that data are examined for a certain time, in which periods with maximum and minimum production volumes are distinguished and the deviation in production volumes is determined by the formula:

∆X = Xmax – Xmin

where X max , X min - the volume of production, respectively, at the maximum and minimum points.

Then calculated cost variance for production in the same periods (maximum and minimum volumes production) according to the formula:

∆U = U max – U min

where Y max , Y min - production costs, respectively, at the maximum and minimum points.

Having calculated these values, you can determine the rate of variable costs per unit of output using the following formula:

c = ∆U/ ∆X.

Knowing the rate of variable costs per unit of output, the volume of production (maximum or minimum) and total costs in the study period, we can find average value of fixed costs in a given period:

A \u003d Y - vX.

By substituting the calculated values of fixed, variable costs and various values of production volume into the formula for the behavior of total costs, one can obtain information about the estimated amount of total costs that an enterprise must incur in order to release the planned volume of production. Based on the same formula, you can plot the dependence of total costs on the volume of production, which will allow you to more clearly see the prospects for production. The peculiarity of the constructed graph is that it crosses the axis showing the change in costs at a point corresponding to the value of fixed costs. But we should not forget that, using changes in production volumes and costs in the original calculations, we will receive approximate data on total costs.

In practice, it is not always possible to single out the variable and fixed components of mixed costs, the number of which can reach several dozen. For this, they are used various methods, the essence of which can be revealed using the cost behavior graph (Fig. 7.5).

Rice. 7.5. Graphical representation cost ¾ volume relationships

General production costs (C full) consist of two parts: constant (C post) and variable (C lane), which is reflected by the equation:

C full \u003d C post + C lane. (7.1)

The sum of variable costs is the product of variable costs per unit of product, i.e., the rate of variable costs (with lane) and the volume of output in physical units (In n.e. . ):

From lane \u003d from lane + V n.e. (7.2)

Then expression (7.1) can be represented in the following form:

C full \u003d C post + c lane ´ In n.e . . (7.3)

Based on specific data, an equation of total costs is constructed, which, approximating actual data, gives an idea of the dependence of total costs on the volume of sales.

Consider an example of constructing an equation for total costs and dividing them into fixed and variable parts using various methods.

1. The method of the highest and lowest points of output for the period (algebraic method) involves the use of the following algorithm:

¨ among the data on the volume of production and costs for the period, choose the maximum and minimum values, respectively, of volume and costs;

¨ find differences in the levels of production volume and costs;

¨ determine the rate variable costs per product by relating the difference in cost levels for the period (the difference between the maximum and minimum cost values) to the difference in production levels for the same period;

¨ determine the total amount of variable costs for the maximum (minimum) production volume by multiplying the variable cost rate by the corresponding production volume;

¨ determine the total amount of fixed costs as the difference between all costs and variable costs;

¨ make up the equation of total costs, reflecting the dependence of changes in total costs on changes in production volume.

Example 7.3. In table. 7.4 shows the initial data on the volume of production and costs for the months of the analyzed period.

Table 7.4 Data for cost analysis using the method of high and low points of output for the period

According to Table. 7.4 shows that the maximum production for the period is 340 units. (in November), minimum ¾ 200 units. (in January). Accordingly, the maximum and minimum production costs are 196 and 140 thousand rubles. The difference in the levels of production volume is 140 units. (340 thousand rubles - 200 thousand rubles), and in cost levels ¾ 56 thousand rubles. (196 thousand rubles - 140 thousand rubles).

The variable cost per product is:

56,000: 140 = 0.4 thousand rubles / unit

The total value of variable costs for the minimum volume of production is 80 thousand rubles. (0.4 thousand rubles: units ´ 200 units), and for the maximum volume ¾ 136 thousand rubles. (0.4 thousand rubles: units ´ 340 units). The total value of fixed costs is defined as the difference between all costs for the maximum (minimum) volume of production and variable costs. For our example, it will be 60 thousand rubles. (196 thousand rubles - 136 thousand rubles or 140 thousand rubles - 80 thousand rubles). Cost equation for this example in accordance with expression (7.3) has the form:

C total = 60 + 0.4 ´ V n.u. .

The high and low point method is easy to use, but its disadvantages should be noted:

¨ the use of only two values ¾ the largest and the smallest means that the results can be distorted due to random variations in these values;

2. Method of dispersion. More accurate is method dispersion or a scatter that includes all observed points in the cost data. After the image of the points, a regression line is drawn so that an equal number of points remains above and below this line. The point of intersection of the regression line with vertical axis shows the amount of fixed costs. Using the total cost for the point that fell on the regression line, the element of variable costs is obtained. Further, by dividing this amount by the level of activity at the same point, the variable cost rate is obtained.

A variance plot can be of great benefit to an experienced analyst. Jumps in cost behavior caused by strikes, bad weather, power outages, rising prices during the period inflation , become obvious. An experienced observer can make appropriate adjustments (discard outliers, evaluate reliable data separately, divide a long period of time into a number of shorter intervals, etc.). In addition, it is useful to start almost any cost analysis with a graphical representation.

Example 7.4. It is necessary to analyze the mixed costs associated with the delivery of goods. The actual data on these costs are reflected in table. 7.5.

Table 7.5. Data for conducting cost analysis using the dispersion method

Based on the graphical interpretation, the task is to plot the straight line shown in Fig. 2 from these data. 7.6.

Rice. 7.6. Approximation of actual data by linear dependence

C total = 9.7 + 2 ´ V n.u. .

3. Least squares method. If, when plotting a graph using the dispersion method, the line is drawn visually, then the selection of a straight line of total costs using the least squares method is performed using standard regression analysis techniques. It is built on calculations that are based on the straight line equation (7.4):

Y = ax+b (7.4)

where Y¾ dependent variable;

a¾ the degree of variability (or the tangent of the slope of the regression line);

b¾ permanent element;

x¾ independent variable.

Least square method used to find such a and b, so that the values of the dependent variable obtained from the regression equation Y approached as close as possible to its observed values. Let the error:

where Y¾ observed value,

¾ expected value.

The least squares method allows you to minimize the sum of squared deviations of the observed value from the expected value, i.e.:

(7.6)

From the basic equation (7.6) and the set of observations n regression equations can be obtained:

∑ XY = a∑ X 2 + b∑ X, (7.7)

∑ Y = n.b. + a∑ X, (7.8)

where X¾ volume of production (sales), nature. units;

Y¾ total (mixed) costs;

a¾ variable cost rate;

b ¾ fixed costs ;

n¾ number of observations.

Example 7.5. Assume that the company wants to divide its costs into variable and fixed parts. Electricity costs ( Y) and production volume ( X) are presented in Table. 7.5.

Substituting these sums into equations (7.7) and (7.8), we obtain:

1158 a + 116 b = 3487; (7.9)

116 a + 12 b = 353. (7.10)

To solve, one of the expressions should be eliminated: multiplying (7.9) by 12, and (7.10) by 116, it follows from (7.9) to subtract (7.10):

13 896 a + 1392 b = 41 844

13 456 a+ 1392 b = 40 948

440 a = 896

a = 2,0364

Consequently, the variable rate in the cost of electricity is 2.0364 thousand rubles. for every thousand manufactured products (or 0.0020364 thousand rubles / product). Fixed electricity costs can be obtained by substituting into any of the equations: (7.9) or (7.10):

116 a + 12 b = 353

116´ 2.0364 + 12´ b = 353

12 b = 353 - 236,2224

12 b = 116,7776

b = 9,7315

Thus, the fixed costs of electricity are 9731.5 rubles. per month, the rate of variable costs is 2036.4 rubles. per 1000 manufactured products. The cost equation in accordance with expression (7.3) for this example is:

From full = 9.7315 + 2.0364 ´ In n.u.

The cost formula can be used for purposes planning . Assume that 10,500 items can be produced over the next month. With this level of activity, the cost of electricity will be, thousand rubles:

From full \u003d C post + c lane ´ In n.e. = 9.7315 + 2.0364 ´ 10.5 = 31.1137 thousand rubles

4. Alternative method. Consider an approach that is an alternative to the least squares method. Let's assume that the enterprise wishes to define the formula of expenses for maintenance and operation of the equipment. A preliminary analysis revealed that the variable part of the costs depends on the number of machine hours worked. It is necessary to obtain a cost formula based on the data of the first half of the planned period by an alternative method (Table 7.6).

Table 7.6

Average values are determined:

(7.12)

The variable cost rate is:

The total fixed costs are determined from the equation:

For this example:

0.0016 thousand rubles/machine-hour ´ 556,833 machine hours + b= 1.955 thousand rubles;

b\u003d 1.955 - 0.912 \u003d 1.043 thousand rubles. per month.

The cost equation in accordance with expression (7.3) for this example is:

From full = 1.043 + 0.0016 ´ In n.u. .

The schedule of cumulative expenses is presented on fig. 7.7.

Rice. 7.7. Total cost schedule

In all calculations, one independent factor ¾ productivity (production or sales volume, direct labor hours, machine hours, sales revenue). But dependence on production volume and sales is not clearly visible for all types of costs, that is, there is not always a strong correlation of a particular type of cost with the volume of production (sales). It is recommended to use additional factors:

¨ volume of production in physical terms;

¨ sales volume in monetary terms;

¨ straight labor costs;

working hours technological equipment;

¨ consumption electrical energy etc.

. Expense function is a mathematical description of the relationship between costs and "their factors

The presence of various costs makes it difficult to construct the cost function. That is why various methods are used to determine the cost function (Fig. 177)

. Fig 177. Methods for constructing a cost function

In practice, costs are several cost factors, but one or two influential factors are mainly chosen to build the cost function.

. Cost prediction - forecasting future costs for different levels (conditions) of activity

1722 Technology Analysis

. Technological analysis (engineering method) - system analysis activity functions in order to determine the technological relationship between resource costs and the result of activity

This analysis requires detailed study all operations, the feasibility of their implementation, determining the necessary operations, the need for resources and assessing the adequacy of their use. This is a kind of functional-value analysis of activity. This method is convenient and effective in enterprises using the "standard-cost-cost" system.

. advantage of this analysis is that it is focused on future operations, and not on the study of past performance

However, the disadvantage is that it requires a significant investment of money and time.

1723 Account analysis method

. Account analysis method (method of analysis of accounting data, method of analysis of accounting accounts) - a method for determining the cost function by dividing them into variables and constants according to the appropriate factor based on the study of data from accounting accounts. It is carried out by a specialist on the basis of intuition, experience and observation of the dynamics of expenses of past periods.

. advantage This method is the ability to calculate the functions of all expenses of the enterprise. Also, this method is widely used in practice due to its simplicity and clarity.

Since this method is based on the experience of managers and the analysis of past events, the disadvantages of the method are considered to be a certain subjectivity and the possibility of significant differences between future and past conditions of action.

1724 High-low method

. High-low point method (absolute increment method, minimax method) is a method of determining the cost function based on the assumption that variable costs are the difference between the total costs of high and low levels of activity, this method uses the highest and lowest points. High point is defined as the point corresponding to the highest output or high level activities. The trough is defined as the point with the lowest output or lowest level of activity.

This method is the simplest and is quite common abroad.

The essence of this method is that we draw the line of the cost function through the highest and lowest points of the graph, ignoring all other points. But if other points do not have a close relationship with the maximum and minimum m points, the cost function does not reflect the real relationship between costs and their factor.

1725 Method of visual adjustment

. Visual fit method (graphic method of visual observation, graphical method) is a graphical approach to determining the cost function, in which the analyst visually draws a straight line, taking into account all points of expenditure. It does not belong to non-mathematical methods.

. advantage is the visibility of the nature of the behavior of costs . disadvantage of this method is subjective, since the results of calculations significantly depend on the accuracy of the eye and the inflexibility of the hand of the analyst

1726 Regression analysis method

. Regression analysis is a statistical model used to determine the change in the mean value of a dependent variable due to a change in the value of one or more independent variables

When applying regression analysis to determine the cost function, the total amount of costs is considered as a variable depending on a certain factor (production volume, number of orders, etc.), acting as an independent value.

Regression analysis, unlike the high-low point method, takes into account all the observational data to determine the cost function

. Least square method - this is a statistical method that allows you to calculate the elements of the cost function but and in so that the sum of the squares of the distance from all points of the population under study to the regression line is the smallest

. Simplified statistical analysis - This is a method for determining the cost function, providing for the distribution of indicators into two groups, based on the growth of the value of x, and the calculation of fixed costs based on the average values of x and y. This method was proposed by a Ukrainian scientist, academician. MG. Chumachenkokonko.

. advantage methods of regression analysis is to ensure the objectivity of the methods of accurate mathematical calculations. However disadvantage need availability a large number observations of the response of costs to a change in a factor

A generalized description of the methods for studying the behavior of costs can be reflected using the table (Table 172)

Management judgment can be used alone or in combination with high-low, scatterplot, or least-squares methods to estimate constants and variable costs

. Table 172 . Characteristics of methods for studying cost behavior

173 Management judgments in determining cost behavior

. Management judgments are extremely important in determining cost behavior and in practice is the most widely used method. Many managers simply use their experience and past observations of the adequacy of spending pits to determine fixed and variable costs. This method, however, can take many forms. Some managers simply categorize the costs of a particular activity as fixed, while others as variable, ignoring the presence of mixed costs.

The advantage of using managerial judgment to separate fixed and variable costs is its simplicity. In situations where the manager has a deep understanding of the firm and its cost patterns, this method will give good results. However, if the manager does not have the appropriate judgment, this method will lead to errors. Therefore, it is very important to take into account the experience of the manager, the possibility of error and the impact that a favor can have on an appropriate decision.

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