# Cost Analysis ```COST ANALYSIS
COST ANALYSIS
• Cost analysis based on geographic comparison . This is a comparison of the costs (eg, for
the cost types, because each business is 'collect' them). and the analysis of the
distribution costs of the partial cost of particular cost groups.
• An analysis based on chronological comparison could be
• a retrospective cost analysis ;
• prospective cost analysis.
• A retrospective cost analysis or cost estimate. The prospective cost analysis practically
means planning for future costs. The average costs of the previous period, various trends,
etc.
CONT…
• The purpose of the analytical methods is the one set out in the report. Obviously, costs
may be classified.
• It is based on an analysis of the costs of a correlation with a cost attribute.
• Proportional digressive, progressive, or even regressive costs.
COMPARATIVE RATIOS IN COST ANALYSIS
• Analysis of costs and cost variation
• Cost breakdown
• Cost ratio
• Cost level
• margin
ANALYSIS OF COSTS AND COST VARIATION
• Costs and cost variations can be analyzed with dynamic ratios and absolute differences.
• The dynamic ratios show variation between two periods as a percentage or as a coefficient.
• The difference between the costs and the analysed period.
• Absolute difference = Costs of the current period - Base or budget costs
COST BREAKDOWN
• The cost breakdown ratio shows the ratio of the costs of the group.
THE FOLLOWING TABLE CLASSIFIES THE COSTS OF A
• Compared to the base period by HUF 1,605 thousand (12.75%).With the exception of depreciation, the
costs are higher than in the current period, etc .;
•
Among the cost types, the highest rates are in both periods, because they are the most important ones.
COST RATIO
• The cost ratio expresses the correlation between the various cost types and production value.
Symbols:
• q: produced quantity
• f: resources / product (kg / item, liter / item, kg / meter, wh / item, mh / item, etc.)
• p: specific resource price (HUF / kg, HUF / liter, HUF / wh, HUF / mh, etc.)
• (a) sales price of the product (price);
• :: unit cost of the product in a particular cost type
COST LEVEL
• The cost level is the coefficient of the cost of production.
• Depending on the costs, the costs will be different.
• The cost ratio indicator is identical to the cost indicator.
• Remark: The cost-ratio and cost-level calculation, i.
CONT…
MARGIN
• The margin is the gross profit and the revenues.
• q: means the quantity sold in this case
• q * a: revenues
• &Ouml;: production cost of the goods sold
• If the cost is the level of the direct costs of sales,
CONT…
• then the following formula:
• The following table illustrates the correlation between the margin and the cost level:
METHODS OF DIRECT COST ANALYSIS
• Direct costs may include:
1.
Analysis of the breakdown of the different direct cost groups.
2.
Analysis of costs (analysis of the variation and dynamics of the direct costs).
3.
Analysis of the following factors:
a) Cumulative difference breakdown
b) Alternative difference breakdown
c) Partial difference breakdown
ANALYSIS OF THE DIRECT COSTS OF THE CHAIN
METHOD
• In the chain method, a single factor is changed at a time.
• The method is simple, but it is an inaccurate one.
• The factors used in the analysis are the direct costs.
• The cost of the following formula:
• K 1 + K 2 + K 3 + ... + K n = VALUATION COST
• The cost components (K) could be cost, wage costs, divided operating costs,
etc. depending on which types of costs are involved.
PARTICULAR COST COMPONENT
• q: produced quantity
• f: resources / product (kg / item, liter / item, kg / meter, wh / item, mh / item, etc.)
• p: specific resource price (HUF / kg, HUF / liter, HUF / wh, HUF / mh, etc.)
• &ouml;: unit cost of the product
• Impact of volume changes
• The f and p factors are considered fixed during the analysis.
IMPACT OF ANY USE OF SPECIFIC RESOURCES
• In line with the chain method, any modified factor ( q ) Used also in the analysis at the
modified value (q 1 ).
IMPACT OF TARIFF CHANGES
• If several products are manufactured, cost variations are triggered not only by the
quantity of product, but also by changes in production, several resource norms makes a
difference.Yes, the impact of volume changes
• 1. Impact of the net volume changes
• 2. Impact of the composition changes
IMPACT OF THE NET VOLUME CHANGES
IMPACT OF THE COMPOSITION CHANGES
ALTERNATIVE DIFFERENCE BREAKDOWN
• Steps of the standardization method:
• 1. Quantification of the single-factor impacts
• 2. Quantification of the concurrent changes
• 3. Breakdown of the concurrent changes to the factors involved in the influencing factors
• the. based on the basis of differences from 1,
• b. calculated from its logarithm
• 4. Addition of the results of the previous calculations
PARTIAL DIFFERENCE BREAKDOWN METHOD
• Steps of the partial difference breakdown method:
1. Quantification of the single-factor impacts
2. Quantification of the concurrent changes
3. Distribution of the impacts of the concurrent changes in the effective factors involved in the
concurrent changes. (Any bi-factor concurrent changes are also a three-factor concurrent
change.)
4. Summary of the results of the calculation.
COST ANALYSIS BASED ON FLEXIBILITY
• Where to use cost analysis based on flexibility?
(a) in the analysis of operating costs;
(b) in the analysis of direct costs;
STEPS OF A COST ANALYSIS BASED ON FLEXIBILITY
1. Classification of costs by function. (Establishment of a homogeneous cost group,
determined by the cost attribute.)
2. Definition of indicators with average or most frequent workload. (J 0 = Cost attribute
with most frequent workload, K 0 = cost with the most frequent workload)
3. Definition of the degree of reaction (r).
4. Calculation of the eligible costs.
POSSIBLE COST ATTRIBUTES:
• For machine costs: machine hour
• For heating costs: heated air cubic meter
• For energy costs: kWh consumption
• For maintenance cost: maintenance hours
• For operating costs: working hour
• For internal transportation costs: ton kilometre
(CLASSICAL) FLEXIBLE COST ANALYSIS
• The classical flexible cost analysis can be:
• a progressive cost analysis of cost-based analysis
• a retrospective cost analysis
• The progressive cost analysis is used for the analysis of the costs of the current period.
• Correlations and symbols used in a cost analysis based on flexibility
CONT…
• r: degree of reaction
• K 0 : base cost
• K R : technically and economically eligible costs
• J 1 : cost attribute, for a retrospective cost analysis,
• V: dynamic correlation expressing the variation of the cost attribute containing the following information:
• 1. for retrospective cost analysis V = J 1 / J 0
• 2. for progressive cost planning V = J t1 / J 0
• v: deviation of the variations of the cost attribute from 1,
• K 1 : Actual Cost
• K t R : eligible cost defined with planned cost attributes
• K t R : eligible cost defined with actual cost attributes
DIFFERENCES DEFINED IN FLEXIBLE COST ANALYSIS
• Necessary (justified) difference 1
• Necessary (justified) difference 2
• Other difference
EXAMPLE OF A FLEXIBLE COST ANALYSIS
EXERCISES
• Let's calculate the planned technically and economically eligible cost amount.
• Let us calculate the general operating costs.
Solution
Part 1 solution
Machine cost:
Planned variation of the cost attribute: (132/110 - 1) * 100% =
20%
Planned machine cost: 15,000 * (0.75 * 0.2 + 1) =
HUF 17 250
th
Operating control costs
Planned variation of the cost attribute: (242 / 220-1) * 100% =
10%
Planned operating control costs 12,000 * (0.55 * 0.1 + 1) =
HUF 12 660
th
Planned total of other costs:
HUF 2 250 th
Total planned amount of operating costs:
HUF 32 160
th
Solution
Part 11 solution
Machine cost: (148.5 / 110 - 1) * 100% =
35%
Eligible cost: 15,000 * (0.75 * 0.35 + 1) =
HUF 18 937.5
th
Operating control costs: (278.3 / 220 - 1) * 100% =
26.5%
Eligible cost: 12,000 * (0.55 * 0.265 + 1) =
HUF 13 749
th
Other eligible costs:
HUF 2 250 th
Total eligible general operating costs:
HUF 34 936.5
th
Necessary difference caused by J t - J 0 difference and r: 32 160 - 29 250 =
+ HUF 2 910
th
Necessary difference caused by J t - J 0 difference and r: 34 936.5 - 32 160 =
+ HUF 2 776.5
th
Other difference: 34 170 - 34 936.5 =
- HUF 766.5
th
DESCRIPTIVE EVALUATION:
• Total operating costs increased by HUF 4,920 thousand (HUF 34,170 thousand - 29,250
thousand).
• The most of the cost increase (HUF 2,910 thousand + 2,776.5 thousand HUF 5,686.5 th)
is the volume of cost attributes above the general workload.
• The other factors (eg, unit prices) had an overall cost of \$ 766.5 thousand.
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