COST BEHAVIOR

ANALYSIS
Fixed Cost
• A fixed cost is defined as one that does not change in total as business
activity increases or decrease.
• Although some kinds of costs may have the appearance of being
fixed, all costs are variable in the long run.
• If activity is expected to increase beyond the capacity of current
facilities, fixed costs must be increased to handle the expected
increase in volume.
• It must acquire additional plant. equipment., indirect labor, and
possibly supervisors in order to produce the level of output necessary
to meet demand.
Fixed Cost
• For this reason, a particular kind of expenditure should be classified
as a fixed cost only within a limited range of activity.
• This limited range of activity is referred to as the relevant range.
• Total fixed cost will change outside the relevant range of activity.
• (Figure 3-1)
Fig 3-1 Fixed Cost
Variable Cost
• A variable cost is defined as one that increases in total proportionately with
an increase in activity and decreases proportionately with a decrease in
activity.
• Variable costs include the cost of direct materiala, direct labor, some
supplies, some indirect labor, small tolls, rework and normal spoilage.
• Variable costs usually can be directly identified with the activity that causes
the cost.
• In practice, the relationship between a business activity and the related
variable cost usually treated as if it were linear, that is, total variable cost is
assumed to increase by a constant amount for each unit increase in activity.
Variable Cost
• However, the actual relationship is rarely perfectly linear over the
entire range of possible activity. Productive efficiency usually changes
when the work load is very light or very heavy.
• As a result of this factors, the cost per unit of activity usually different
at widely levels of activity.
• Nevertheless, within a limited range of activity, the relationship
between an activity and the related cost may closely approximate
linearity.
• (Figure 3-2).
Fig 3-2 Variable Cost
Semi Variable Cost
• A semi variable cost is defined a one that displays both fixed and
variable characteristics.
• Example: cost of electricity, water, gas, fuel, oil, coal, some supplies,
maintenance, some indirect labor, etc.
Separating Fixed and Variable Cost
• In order to plan, analyze, control, measure, or evaluate costs at
different levels of activity, fixed and variable costs must be separated.
• Those costs that that are entirely fixed or entirely variable within the
range of activity anticipated must be identified, and the fixed adnd
variable components of semi variable costs must be estimated.
• In practice, managerial judgment often is used to classify costs as
fixed or variable. In such cases, classification is based on the personal
experience of management.
Separating Fixed and Variable Cost
• Generally, more reliable classifications and cost estimates are
obtained by using one of the following computational methods:
• [1] the high and low points method;
• [2] the scatter graph method; or
• [3] the method of least squares.
[1] High and Low Points Method
• In the high and low points method, the fixed and variable elements of
a cost are computed from two data points. The data points (periods)
selected from the historical data are the periods of highest and lowest
activity.
• The highest and lowest periods are selected because they represent
conditions for two activity levels that are the farthest apart.
• However, care must be taken not to select data points distorted by
abnormal conditions.
• Data Barker Company (Exhibit3-1)
Exhibit 3-1
[2] Scattergraph Method
• The scattergraph method can be used to analyze cost behavior.
• In this method, the cost being analyzed (the dependent variable) is
plotted on a vertical line (the y-axis), and the associated activity (the
independent variable,-forexample, direct labor dollars, direct labor
hours, machine hours, units of output, or percentage of capacity) is
plotted along a horizontal line (x-axis).
• Figure 3-4.
Figure 3-4
[3] Method of Least Square
• The method of least squares (sometimes called regression analysis)
determines mathematically a line of best fit or linear regression line
through a set of plotted points, so that the sum of the squared
deviations of each actual plotted point from the point directly above
or below it on the regression line is at a minimum.
               
   
  n y x xy x^2 y^2  
  1 640 34,000 21,760,000 1,156,000,000 409,600  
  2 620 30,000 18,600,000 900,000,000 384,400  
  3 620 34,000 21,080,000 1,156,000,000 384,400  
  4 590 39,000 23,010,000 1,521,000,000 348,100  
  5 500 42,000 21,000,000 1,764,000,000 250,000  
  6 530 32,000 16,960,000 1,024,000,000 280,900  
  7 500 26,000 13,000,000 676,000,000 250,000  
  8 500 26,000 13,000,000 676,000,000 250,000  
  9 530 31,000 16,430,000 961,000,000 280,900  
  10 550 35,000 19,250,000 1,225,000,000 302,500  
  11 580 43,000 24,940,000 1,849,000,000 336,400  
  12 680 48,000 32,640,000 2,304,000,000 462,400  
  Sum 6,840 420,000 241,670,000 15,212,000,000 3,939,600  
  Av 570 35,000        
   
   
  b 0.0044  
  a 415  
  r2 0.246673  
  r 0.496662  
  S y,x 55.44  
  Sb 0.00000  
               
 Output jika menggunakan Aplikasi Excel.
Tersedia banyak program aplikasi statistika yang bisa dipakai (Minitab,
SPSS, dsb).

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.49666
R Square 0.24667
Adjusted R Square 0.1713403
Standard Error 55.439825
Observations 12

ANOVA
  df SS MS F Significance F
Regression 1 10064.25781 10064.26 3.274448 0.10047708
Residual 10 30735.74219 3073.574
Total 11 40800      

  Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 414.82 87.23472718 4.755265 0.000774 220.4531339 609.1953036
x 0.00443 0.002450117 1.809543 0.100477 -0.00102561 0.009892795
Result:
Fixed cost = $416
Variable cost = $0,0044 per direct labor hours
Koefisen korelasi = 0,49 (kurang kuat)
Result:
• Fixed Cost = a = $305
• Variable Cost = b = $0,01 per direct labor hours
• Coefficient of determination r2 = 0, 95
• Coefficient of correlation = 0,9499 = 0,97 (very strong correlation)
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