Cost Classification and Cost Behavior

Cost Classification and Cost Behavior

EMBA 5403Fall 2008Mugan

Fall 2008 Mugan 2/ 85

Types of Costs

differential costs- (benefits) – costs or benefits that change between/among alternatives

Irrelevant costs -Costs that don’t change are irrelevant to the decision

Choose the alternatives where differential benefits exceed differential costs

Opportunity costs Sunk costs Controllable /avoidable costs/discretionary

costs

The opportunity cost is the monetary amount associated with the next best use of the resource.

Costs that have already been incurred and cannot be changed no matter what action is taken in the future.

Costs that have already been incurred and cannot be changed no matter what action is taken in the future.


Problems in Identifying and Measuring Benefits

How do I measure the benefit of

employee training?

How do I measure the benefit of

employee training?What is the

monetary benefit of a happy customer?

What is the monetary benefit of a happy customer?

What is the monetary

benefit of an improved working

environment?

What is the monetary

benefit of an improved working

environment?

How do I measure the

benefit of improved quality?


benefit of improved quality?


Problems in Identifying and Measuring Costs

What is the cost of a dissatisfied

customer?

What is the cost of a dissatisfied

customer?


cost of setting my price too

high?


cost of setting my price too

high?

How do I measure the cost of poor

quality?

How do I measure the cost of poor

quality?

What is the cost of postponing

this year’s training

program?

What is the cost of postponing

this year’s training

program?


Behavior – how costs react to changes in underlying cost driver Variable or Fixed

Function – related to production or sales Product or Period Product costs –

Direct Material Direct Labor Factory Overhead

Traceability (cost of tracing cost to a cost driver directly should be lower than the benefits.

Classifications of Costs


Non-manufacturing Costs

Marketing or Selling Costs

Costs necessary to get the order and deliver

the product.

Administrative Costs

All executive, organizational, and

clerical costs.


WorkRaw Materials In Process

Beginning raw Direct materials materials inventory

+ Raw materials purchased

= Raw materials

available for use in production

– Ending raw materials inventory

= Raw materials used

in production

Product Cost Flows



Beginning raw Beginning work in materials inventory process inventory

+ Raw materials Direct materials purchased + Direct labor

= Raw materials + Mfg. overhead available for use = Total manufacturing in production costs

– Ending raw materials inventory

= Raw materials used

in production

Product Cost Flows

Conversion Costs

Prime Costs



Beginning raw Beginning work in materials inventory process inventory

+ Raw materials purchased Direct materials

= Raw materials + Direct labor available for use + Mfg. overhead in production = Total manufacturing

– Ending raw materials costs

inventory= Raw materials used

in production

Product Cost Flows



Beginning raw Beginning work in materials inventory + process inventory

+ Raw materials + + Total manufacturing purchased = costs

= Raw materials = Total work in available for use process for the in production period

– Ending work in process inventory

= Cost of goods

manufactured

Product Cost Flows


Product Cost Flows


Manufacturing Cost Flows

FinishedGoods

Cost of GoodsSold

Selling andAdministrative

Period CostsSelling andAdministrative

ManufacturingOverhead

Work in Process

Direct Labor

Balance Sheet Costs Inventories

Income StatementExpenses

Material Purchases Raw Materials


Graphical Analysis of Activity Costs and Rate of Output

Total Dollars

Start-up Range

Normal Operations

Exceeding Capacity

Output

Curvilinear Total Cost Curve

Curvilinear Total Cost Curve

Marginal CostsMarginal Costs are the costs to produce one

more additional unit of output=slope.Marginal CostsMarginal Costs are the costs to produce one

more additional unit of output=slope.


Relevant Range The relevant range is the portion of the curvilinear total cost curve that appears

in the normal operations area.

The relevant range is the portion of the curvilinear total cost curve that appears

in the normal operations area. }

Relevant Range

Relevant Range Total

Cost

Output

Total Dollars

Start-up

Range

Normal Operation

s

Exceeding Capacity


RelevantRange

A straight line closely

approximates a curvilinear

variable cost line within the

relevant range.

A straight line closely

approximates a curvilinear

variable cost line within the

relevant range.

Activity

To

tal

Co

st

Economist’sCurvilinear Cost

Function

The Linearity Assumption and the Relevant Range

Accountant’s Straight-Line Approximation (constant

unit variable cost)


Cost Classifications for Predicting Cost Behavior

By reaction to changes in the level of activity within the relevant range.

Total variable costs change when activity changes.

Total fixed costs remain unchanged when activity changes.

By reaction to changes in the level of activity within the relevant range.

Total variable costs change when activity changes.

Total fixed costs remain unchanged when activity changes.



Cost Classifications for Predicting Cost Behavior

Behavior of Cost (within the relevant range)

Cost In Total Per Unit

Variable Total variable cost changes Variable cost per unit remainsas activity level changes. the same over wide ranges

of activity.

Fixed Total fixed cost remains Average fixed cost per unit goesthe same even when the down as activity level goes up.

activity level changes.


Extent of Variable CostsThe proportion of variable costs differs across organizations. For example . . .

A public utility withA public utility withlarge investments inlarge investments inequipment will tendequipment will tend

to have to have fewerfewervariable costs.variable costs.

A public utility withA public utility withlarge investments inlarge investments inequipment will tendequipment will tend

to have to have fewerfewervariable costs.variable costs.

A manufacturing companyA manufacturing companywill often have will often have manymany

variable costs.variable costs.

A manufacturing companyA manufacturing companywill often have will often have manymany

variable costs.variable costs.

A merchandising companyA merchandising companyusually will have a usually will have a highhigh

proportionproportion of variable costs of variable costslike cost of sales.like cost of sales.

A merchandising companyA merchandising companyusually will have a usually will have a highhigh

proportionproportion of variable costs of variable costslike cost of sales.like cost of sales.

A service companyA service companywill normally have a will normally have a highhigh

proportionproportion of variable costs of variable costs..

A service companyA service companywill normally have a will normally have a highhigh

proportionproportion of variable costs of variable costs..


Examples of Variable Costs Merchandising companies – cost of goods

sold. Manufacturing companies – direct

materials, direct labor, and variable overhead.

Merchandising and manufacturing companies – commissions, shipping costs, and clerical costs such as invoicing.

Service companies – supplies, travel, and clerical


ExamplesAdvertising and Research and Development

ExamplesAdvertising and Research and Development

ExamplesDepreciation on Equipment and

Real Estate Taxes

ExamplesDepreciation on Equipment and

Real Estate Taxes

Types of Fixed Costs

DiscretionaryMay be altered in the short-term by current managerial

decisions

DiscretionaryMay be altered in the short-term by current managerial

decisions

CommittedLong-term, cannot be significantly reduced

in the short term.

CommittedLong-term, cannot be significantly reduced

in the short term.


Activity (minutes)

Mixed Costs

Fixed Monthly

Phone Charge

Fixed Monthly

Phone Charge

To

tal M

ob

ile P

ho

ne

Co

st

X

Y

Total mixed cost


Fixed Monthly

Phone Charge

Variable

Cost per minute

Activity (minutes)

To

tal M

ob

ile P

ho

ne

Co

st

X

Y

Mixed Costs

Total mixed cost


Plot the data points on a graph Plot the data points on a graph (total cost vs. activity).(total cost vs. activity).

Plot the data points on a graph Plot the data points on a graph (total cost vs. activity).(total cost vs. activity).

0 1 2 3 4

*

Co

st

10

20

0

***

**

**

*

*

Activity - output

X

Y

The Scattergraph Method



Draw a line through the data points with about anDraw a line through the data points with about an

equal numbers of points above and below the line.equal numbers of points above and below the line. Draw a line through the data points with about anDraw a line through the data points with about an

equal numbers of points above and below the line.equal numbers of points above and below the line.

0 1 2 3 4

*

Co

st

10

20

0

***

**

**

*

*

Activity - output

X

Y


The Scattergraph MethodUse one data point to estimate the total level of activity and the total Use one data point to estimate the total level of activity and the total

cost. cost.

Use one data point to estimate the total level of activity and the total Use one data point to estimate the total level of activity and the total cost. cost.

Intercept = Fixed cost: TL 10

0 1 2 3 4

*

Co

st

10

20

0

***

**

**

*

*

Activity - output

X

Y

Activity 0.8 unitsActivity 0.8 units

Total cost = TL11Total cost = TL11



Make a quick estimate of variable cost per unit and determine the cost equation. .

Make a quick estimate of variable cost per unit and determine the cost equation. .

Variable cost per unit = TL1 0.8

= TL1.25/ unit of output

Y = TL10 + TL1.25XY = TL10 + TL1.25XY = TL10 + TL1.25XY = TL10 + TL1.25X

Total Cost at 0.8 units 11 TLLess: Fixed cost 10 TLEstimated total variable cost 0.8 units 1 TL

Total Cost at 0.8 units 11 TLLess: Fixed cost 10 TLEstimated total variable cost 0.8 units 1 TL

Total costTotal cost Number of unitsNumber of units


The High-Low Method

Assume the following hours of maintenance work and the total maintenance costs for six months.

High level of activity

Low level of activity


Product Cost Estimation:Technique Classificationand Methodology ReviewNiazi. Dai1. Balabani. SeneviratneJournal of Manufacturing Science and Engineering MAY 2006, Vol. 128,563-575






Assigning Costs to Cost Objects

Direct costs Costs that can be

easily and conveniently traced to a unit of product or other cost object.

Examples: direct material and direct labor

Indirect costs Costs that cannot be

easily and conveniently traced to a unit of product or other cost object.

Example: manufacturing overhead


Cost Classifications for Decision Making

Every decision involves a choice between at least two alternatives.

Only those costs and benefits that differ between alternatives are relevant in a decision. All other costs and benefits can and should be ignored.


Differential Costs and Revenues

Costs and revenues that differ among alternatives.

Example: You have a job paying TL 1,500 per month in your hometown. You have a job offer in a neighboring city that pays TL 2,000 per month. The commuting cost to the city is TL 300 per month.

Example: You have a job paying TL 1,500 per month in your hometown. You have a job offer in a neighboring city that pays TL 2,000 per month. The commuting cost to the city is TL 300 per month.

Differential revenue is: TL2,000 – TL1,500 = TL500

Differential cost is: TL 300


Opportunity Costs

The potential benefit that is given up when one alternative is selected over another.

Example: If you were not attending this program, you could save TL 10,000 per year.

Your opportunity cost?


Sunk Costs

Sunk costs have already been incurred and cannot be changed now or in the future. They should be

ignored when making decisions.

Example: You bought an automobile that cost TL10,000 two years ago. The TL10,000 cost is sunk because whether you drive it, park it, trade it, or sell it, you cannot change the TL10,000 cost.


Summary of the Types of Cost Classifications

Financial reporting Predicting cost behavior Assigning costs to cost objects-

products- determining unit costs Decision making


The Contribution Format

Used primarily forUsed primarily forexternal reporting.external reporting.

Used primarily byUsed primarily bymanagement.management.


Idle Time

The labor costs incurred during idle time are ordinarily

treated as manufacturing overhead.

Machine Breakdowns

Material Shortages

Power Failures


Overtime

The overtime premiums for all factory workers are usually considered to be part

of manufacturing overhead.


Unit Costs Direct Material- determined as actual usage of

materials or by engineering estimates (standard costs)

Direct Labor- determined as actual usage of materials or by engineering estimates (standard costs)

MOVH – common production costs assigned to each unit Traditional ABC

Unit cost = DM + DL + MOVH per unit


Labor Fringe Benefits

Fringe benefits include employer paid costs for insurance programs, retirement plans,

supplemental unemployment programs, Social Security, Medicare, workers’ compensation and

unemployment taxes.

Some companies include all of these

costs in manufacturing

overhead.

Other companies treat fringe benefit

expenses of direct laborers as additional

direct labor costs.


How to allocate indirect costs to products MOVH

Depends on the nature of products and production system

Traditional- direct labor hours (DLH); number of units produced;

Automation and computer technology have increased the indirect costs in many organizations

Activity-Based Costing (ABC)- a procedure that attempts to provide a more precise indirect cost allocation


Continue

Numerical Example- Unit Cost THD Company produces 4,000 units of Product A

and 20,000 units of Product B each year. Direct Material for Product A is TL 10; Product B 15 Total indirect product costs are TL 900,000, and

total direct labor hours(DLH) are 50,000. Product A requires 2.5 DLH and Product B requires

2.0 DLH to produce. Direct labor cost per hour TL 30


Numerical Example

Management at THD believes that indirect costsManagement at THD believes that indirect costsare actually caused by the following five activities:are actually caused by the following five activities:

EstimatedActivity Costs Machine setups 255,000 TL Quality inspections 160,000 TL Production orders 81,000 TL Machine-hours worked 314,000 TL Material receipts 90,000 TL Total 900,000 TL


Unit Cost - Traditional

THD uses DLH as the basis1.determine the allocation of MOVH per

unit = predetermined overhead rate(PDOR) PDOR= Total Overhead/ Total DLH

2. determine MOVH per unit = PDOR x DL Cost per hour

3. add DM,DL and MOVH per unit


PDOR and MOVH

Total Overhead 900,000 TLDirect Labor Hours:Product A - 2.5 DlH 10000Product B - 2 DLH 40000Total Direct Labor Hours 50000Predetermined Overhead Rate 18 TL per DLH

Manufacturing Overhead per unit of A 2.5 DLH 45 TL per unitManufacturing Overhead per unit of B 2 DLH 36 TL per unit


Unit Costs – Traditional

UNIT COSTS Product A Product BDirect Material 10 15Direct Labor ( DLH x 30 TL / DLH) 75 60Manufacturing Overhead 45 36 Unit Cost 130 111


Numerical Example-MOVH by ABC

The following activity data was supplied by the management of THD

Activity Total Product A Product B Machine setups 5,000 3,000 2,000 Quality inspections 8,000 5,000 3,000 Production orders 600 200 400 Machine-hours worked 40,000 12,000 28,000 Material receipts 750 150 600



This activity data can be used to develop applicationThis activity data can be used to develop applicationrates for each of the five activities.rates for each of the five activities.

Total Rate perActivity Costs Transactions Transaction

Machine setups 255,000 TL ÷ 5,000 = 51 TL Quality inspections 160,000 ÷ 8,000 ?



Total Rate perActivity Costs Transactions Transaction

Machine setups 255,000 TL ÷ 5,000 = 51 TL Quality inspections 160,000 ÷ 8,000 = 20.00 Production orders 81,000 ÷ 600 = 135.00 Machine-hours worked 314,000 ÷ 40,000 = 7.85 Material receipts 90,000 ÷ 750 = 120.00



Now that we have calculated the application rates, we Now that we have calculated the application rates, we use the rates to assign indirect costs to Product A.use the rates to assign indirect costs to Product A.

Activity ABC Rate Usage Amount Machine setups 51 TL × 3,000 = 153,000 TL Quality inspections 20.00 × 5,000 ?



Now that we have calculated the application rates, we Now that we have calculated the application rates, we use the rates to assign indirect costs to Product A.use the rates to assign indirect costs to Product A.

Activity ABC Rate Usage Amount Machine setups 51 TL × 3,000 = 153,000 TL Quality inspections 20.00 × 5,000 = 100,000 Production orders 135.00 × 200 = 27,000 Machine-hours worked 7.85 × 12,000 = 94,200 Material receipts 120.00 × 150 = 18,000 Total indirect costs assigned 392,200 TL Number of units produced ÷ 4,000 Indirect product costs per unit-MOVH 98 TL



MOVH costs for a unit of Product BActivity ABC Rate Usage Amount

Machine setups 51 TL × 2,000 = 102,000 TL Quality inspections 20.00 × 3,000 = 60,000 Production orders 135.00 × 400 = 54,000 Machine-hours worked 7.85 × 28,000 = 219,800 Material receipts 120.00 × 600 = 72,000 Total indirect costs assigned 507,800 TL Number of units produced ÷ 20,000 Indirect product costs per unit-MOVH 25 TL


Reconciliation check

Reconciliation Amount Indirect costs assigned to Product A 392,200$ Indirect costs assigned to Product B 507,800 Total indirect costs assigned 900,000$


Unit Costs – Using ABC

UNIT COSTS Product A Product BDirect Material 10 15Direct Labor ( DLH x 30 TL / DLH) 75 60Manufacturing Overhead 98.05 25.39 Unit Cost 183.05 100.39


Comparison of Unit Costs

Traditional Using ABCProduct A 130 183.05Product B 111 100.39


Activity-based costing is very useful in firms . . .Activity-based costing is very useful in firms . . .

With multipleproducts and

services.That have products

and services that useindirect activitiesin different ways.

That have a highpercentage of indirect

product costs.

Advantages of ABC


Proper identification Proper identification of cost drivers isof cost drivers is

difficult.difficult. ABC ignores the ABC ignores the

difference betweendifference betweenthe fixed and variablethe fixed and variablecosts of an activity.costs of an activity.

ABC is more costly ABC is more costly because additional because additional measurements and measurements and observations mustobservations must

be made.be made.

Problems With ABC


Quality of Conformance

When the overwhelming majority of products produced conform to design

specifications and are free from defects.


Prevention and Appraisal Costs

Prevention Costs

Support activities whose purpose is to

reduce the number of defects

Appraisal Costs

Incurred to identify defective products

before the products are shipped


Internal and External Failure Costs

Internal Failure Costs

Incurred as a result of identifying defects

before they are shipped

External Failure Costs

Incurred as a result of defective products being delivered to

customers


Examples of Quality Costs

Prevention Costs• Quality training• Quality circles• Statistical process control activities

Appraisal Costs• Testing & inspecting incoming materials• Final product testing• Depreciation of testing equipment

Internal Failure Costs• Scrap• Spoilage• Rework

External Failure Costs• Cost of field servicing & handling complaints• Warranty repairs• Lost sales


Distribution of Quality Costs

When quality of conformance is low, total quality cost is high and consists mostly of internal and external failure.

Companies can reduce their total quality cost by focusing on

prevention and appraisal. The cost savings from reduced defects usually

swamps the costs of the additional prevention and appraisal efforts.


Quality cost reports provide an estimate of the financial

consequences of the

company’s current defect

rate.

Amount Percent* Amount Percent*Prevention costs:

Systems development 400,000$ 0.80% 270,000$ 0.54%Quality training 210,000 0.42% 130,000 0.26%Supervision of prevention activities 70,000 0.14% 40,000 0.08%Quality improvement 320,000 0.64% 210,000 0.42%

Total prevention cost 1,000,000 2.00% 650,000 1.30%

Appraisal costs:Inspection 600,000 1.20% 560,000 1.12%Reliability testing 580,000 1.16% 420,000 0.84%Supervision of testing and inspection 120,000 0.24% 80,000 0.16%Depreciation of test equipment 200,000 0.40% 140,000 0.28%

Total appraisal cost 1,500,000 3.00% 1,200,000 2.40%

Internal failure costs:Net cost of scrap 900,000 1.80% 750,000 1.50%Rework labor and overhead 1,430,000 2.86% 810,000 1.62%Downtime due to defects in quality 170,000 0.34% 100,000 0.20%Disposal of defective products 500,000 1.00% 340,000 0.68%

Total internal failure cost 3,000,000 6.00% 2,000,000 4.00%

External failure costs:Warranty repairs 400,000 0.80% 900,000 1.80%Warranty replacements 870,000 1.74% 2,300,000 4.60%Allowances 130,000 0.26% 630,000 1.26%Cost of field servicing 600,000 1.20% 1,320,000 2.64%

Total external failure cost 2,000,000 4.00% 5,150,000 10.30%Total quality cost 7,500,000$ 15.00% 9,000,000$ 18.00%

* As a percentage of total sales. In each year sales totaled $50,000,000.

Year 2 Year 1

Ventura CompanyQuality Cost ReportFor Years 1 and 2


Quality Cost Reports: Graphic Form

$10

9

8

7

6

5

4

3

2

1Appraisal

0Prevention Prevention

1 2Year

Qu

alit

y C

ost

(in

mil

lio

ns)

Appraisal

Internal Failure

External Failure

Internal Failure

External Failure

20

18

16

14

12

10

8

6

4

2Appraisal

0Prevention Prevention

1 2Year

Qu

alit

y C

ost

as

a P

erce

nta

ge

of

Sal

es

Appraisal

Internal Failure

External Failure

Internal Failure

External Failure

Quality reports

can also be

prepared in

graphic form.


Product Life Cycle

http://www.hss.caltech.edu/~mcafee/Classes/BEM106/PDF/ProductLifeCycle.pdf

Fall 2008 Mugan 68/ 85http://www.hss.caltech.edu/~mcafee/Classes/BEM106/PDF/ProductLifeCycle.pdf

Fall 2008 Mugan 69/ 85http://www.hss.caltech.edu/~mcafee/Classes/BEM106/PDF/ProductLifeCycle.pdf

Introduction Growth Maturity Decline


http://www.ee.unb.ca/powereng/courses/EE2703/EE2703_DetailedDesign2.pdf


http://www.ee.unb.ca/powereng/courses/EE2703/EE2703_DetailedDesign2.pdf


Uses of Quality Cost Information

Help managers see the financial significance of

defects.

Help managers identify the relative importance of the

quality problems.

Help managers see whether their quality costs

are poorly distributed.


ISO 9000 Standards

ISO 9000 standards have become an international measure of quality. To become ISO 9000 certified, a

company must demonstrate:

1. A quality control system is in use, and the system clearly defines an expected level of quality.

2. The system is fully operational and is backed up with detailed documentation of quality control procedures.

3. The intended level of quality is being achieved on a sustained basis.


Appendix

Least-Squares Regression Using Microsoft Excel.


Simple Regression Analysis Example

Matrix, Inc. wants to Matrix, Inc. wants to know its average know its average

fixed cost and fixed cost and variable cost per unit. variable cost per unit.

Using the data to the Using the data to the right, let’s see how to right, let’s see how to do a regression using do a regression using

Microsoft Excel.Microsoft Excel.

Matrix, Inc. wants to Matrix, Inc. wants to know its average know its average

fixed cost and fixed cost and variable cost per unit. variable cost per unit.

Using the data to the Using the data to the right, let’s see how to right, let’s see how to do a regression using do a regression using

Microsoft Excel.Microsoft Excel.


Simple Regression Using ExcelYou will need three pieces of You will need three pieces of

information from your information from your regression analysis:regression analysis:

1.1. Estimated Variable Cost per Estimated Variable Cost per Unit (line slope)Unit (line slope)

2.2. Estimated Fixed Costs (line Estimated Fixed Costs (line intercept)intercept)

3.3. Goodness of fit, or RGoodness of fit, or R22

You will need three pieces of You will need three pieces of information from your information from your regression analysis:regression analysis:

1.1. Estimated Variable Cost per Estimated Variable Cost per Unit (line slope)Unit (line slope)

2.2. Estimated Fixed Costs (line Estimated Fixed Costs (line intercept)intercept)

3.3. Goodness of fit, or RGoodness of fit, or R22

To get these three pieces To get these three pieces information we will need to information we will need to useuse three three different Excel different Excel functions.functions.

LINEST, INTERCEPT, & RSQLINEST, INTERCEPT, & RSQ

To get these three pieces To get these three pieces information we will need to information we will need to useuse three three different Excel different Excel functions.functions.

LINEST, INTERCEPT, & RSQLINEST, INTERCEPT, & RSQ


Simple Regression Using Excel

Place your cursor in Place your cursor in cell F4 and press the cell F4 and press the = key. Click on the = key. Click on the

pull down menu and pull down menu and scroll down to “More scroll down to “More

Functions . . .”Functions . . .”

Place your cursor in Place your cursor in cell F4 and press the cell F4 and press the = key. Click on the = key. Click on the

pull down menu and pull down menu and scroll down to “More scroll down to “More

Functions . . .”Functions . . .”



Scroll down to the Scroll down to the ““StatisticalStatistical”, ”,

functions. Now functions. Now scroll down the scroll down the

statistical statistical functions until you functions until you

highlight highlight ““LINESTLINEST””

Scroll down to the Scroll down to the ““StatisticalStatistical”, ”,

functions. Now functions. Now scroll down the scroll down the

statistical statistical functions until you functions until you

highlight highlight ““LINESTLINEST””



1. In the Known_y’s box enter C4:C19 for the range.

2. In the Known_x’s box enter D4:D19 for the range.









Here is the Here is the estimate of the estimate of the

slope of the line.slope of the line.


Simple Regression Using ExcelWith you cursor in cell With you cursor in cell

F5, press the = key F5, press the = key and go to the pull and go to the pull down menu for down menu for

special functions. special functions. Select Select Statistical Statistical and and

scroll down to scroll down to highlight the highlight the

INTERCEPTINTERCEPT function. function.

With you cursor in cell With you cursor in cell F5, press the = key F5, press the = key and go to the pull and go to the pull down menu for down menu for

special functions. special functions. Select Select Statistical Statistical and and

scroll down to scroll down to highlight the highlight the

INTERCEPTINTERCEPT function. function.







Here is the Here is the estimate of the estimate of the

fixed costs.fixed costs.


Simple Regression Using ExcelFinally, we will Finally, we will determine the determine the ““goodness of goodness of fitfit”, or ”, or RR22, by , by

using the using the RSQRSQ function.function.

Finally, we will Finally, we will determine the determine the ““goodness of goodness of fitfit”, or ”, or RR22, by , by

using the using the RSQRSQ function.function.







Here is the Here is the estimate of estimate of RR22..

Documents

Cost Classification and Cost Behavior