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【正文】 r?Electricity to run machines?Interest expense to finance inventory?Advertising?Goodwill amortization?Sales missions?Sales peoples’ salaries?Sales travel and expensesCosts:Cost Allocation Exercise Question20CU7122397ECAbcBOS Copyright169。 1998 Bain Company, Inc. Cost Accounting Breakeven volume is the volume at which the pany covers its fixed costs. At breakeven volume, the operating profit is zero.VolumeContribution margin (., revenue less variable costs)Fixed costsBreakeven volume$Operating LossFixed costsUnit contribution Price per unit Variable cost per unitBreakeven volume =Fixed costs=Operating Profit Contribution MarginBreakeven Volume16CU7122397ECAbcBOS Copyright169。 1998 Bain Company, Inc. Cost Accounting Definitions: ?Costs that do not vary directly with changes in output?Costs that vary directly with changes in output?Costs incurred directly in the production or delivery of a firm’s product or service. These costs can easily be identified with, or assigned to, a particular product?Costs generally incurred by the firm outside of the production process. These costs cannot easily be identified with, or assigned to, a particular productAll costs can be broken down along two dimensions.Fixed Variable Direct Indirectvs. vs.Examples: ?Equipment depreciation?Rent?Advertising?Raw materials?Production labor?Delivery costs?Direct labor?Dedicated equipment?Raw materials?SGA?Office supplies?Plant managerRule of thumb:If a particular cost changes when production increases or decreases, the cost is variable.If a particular cost “goes away” when a product is dropped from the product line, the cost is direct.Types of Costs12CU7122397ECAbcBOS Copyright169。 1998 Bain Company, Inc. Cost Accounting After a thorough evaluation, the Bain team found that $ in costs had been allocated incorrectly among the three products.Middle America Manufacturing Cost Allocation8CU7122397ECAbcBOS Copyright169。 1998 Bain Company, Inc. Cost Accounting ?Which products are profitable??What is the breakeven volume by product??Which products require cost reduction efforts??How should we price our products??Which customer segments are most profitable?It is critical to have accurate and plete cost data to make sound strategic and tactical management decisions.Why Allocate Costs?4CU7122397ECAbcBOS Copyright169。Author: Collins QianReviewer: Bob Armacost bcCost AccountingMarch 1998Copyright169。 1998 Bain Company, Inc. Cost Accounting ?Importance of cost allocation?Client example?Definitions–direct vs. indirect, fixed vs. variable–breakeven volume?Exercises–cost allocation–breakeven volume?Key takeawaysAgenda3CU7122397ECAbcBOS Copyright169。 1998 Bain Company, Inc. Cost Accounting Middle America Manufacturing, a Bain client, believed that all three of its product lines were profitable.Return on sales: % % %Sales: $250MM $100MM $75MMMiddle America Manufacturing Estimated Profitability7CU7122397ECAbcBOS Copyright169。 1998 Bain Company, Inc. Cost Accounting ?Importance of cost allocation?Client example?Definitions–direct vs. indirect, fixed vs. variable–breakeven volume?Exercises–cost allocation–breakeven volume?Key takeawaysAgenda11CU7122397ECAbcBOS Copyright169。 1998 Bain Company, Inc. Cost Accounting It is useful to know the following terms when doing cost analysis:Simplifie