Professional Documents
Culture Documents
MANAGEMENT
PowerPoint Presentation by ACCOUNTING
Gail B. Wright
Professor Emeritus of Accounting 8th EDITION
Bryant University
BY
© Copyright 2007 Thomson South-Western, a part of The
Thomson Corporation. Thomson, the Star Logo, and
South-Western are trademarks used herein under license.
HANSEN & MOWEN
3
LO 1
4
LO 1
5
LO 1
6
LO 1
7
LO 1
8
LO 2
CAPACITY: Definition
9
LO 2
10
LO 2
FLEXIBLE RESOURCES
11
LO 2
COMMITTED RESOURCES
12
LO 2
COMMITTED RESOURCES:
Can Be
13
LO 2
14
LO 2
15
LO 3
LINEARITY ASSUMPTION
Variable cost
assumes a linear
relationship
between cost and
activity driver.
EXHIBIT 3-7
16
LO 3
HIGH-LOW EQUATIONS
17
LO 3
SCATTERPLOT METHOD
Scatterplot is a
method of
determining the
equation of a line by
plotting the data on
a graph.
EXHIBIT 3-11
18
LO 3
Scatterplot
Allows you to see the data BUT
It lacks any objective criterion
for choosing the best-fitting line
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LO 3
SCATTERPLOT ADVANTAGE
EXHIBIT 3-12
20
LO 3
LEAST SQUARES
EXHIBIT 3-13
21
LO 4
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LO 4
COEFFICIENT OF
DETERMINATION (R2)
Percentage of variability in dependent
variable explained by independent
variable
Range: 0 – 1
Higher is better
23
LO 4
COEFFICIENT OF
CORRELATION
24
LO 5
25
LO 6
MANAGERIAL JUDGMENT
Is a method of cost assignment used to
Determine fixed, variable cost
Uses managerial experience
Uses past observation of cost relationships
To refine statistical estimation results
Advantage: simplicity
Disadvantage: judgment errors
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CHAPTER 3
THE END
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