【正文】 dwill amortization Fixed, because goodwill is not directly related to volume Indirect, assuming the goodwill is incurred to support the whole pany Salespeople39。 1998 Bain amp。 1998 Bain amp。 1998 Bain amp。 1998 Bain amp。 1998 Bain amp。 1998 Bain amp。 1998 Bain amp。 1998 Bain amp。 Company, Inc. Cost Accounting 9 Cost Accounting G e n e r a la d m i n is ta tiv e e x p e n s e sS y s t e m s c o s tsI n ve n to r y c a r r y in g c o s tsW a l k i n g m o w e r sB ic y c l e sR id i n g m o w e r sA d d itio n a l u n a l l o c a te d c o s ts A d d itio n a l c o s t s r e a l l o c a te d$ 1 8 . 8 M M $ 1 8 . 8 M M$0$5$ 1 0$ 1 5$ 2 0Cost (Millions of Dollars)The Bain team also determined that an additional $ in costs should be allocated to the three products. Middle America Manufacturing Additional Costs bc BOS Copyright169。 Company, Inc. Cost Accounting 5 Cost Accounting ?Historically, only 20% of manufacturing costs were “shared” across product lines. Today, typically 50% of costs are “shared” across products. Shared costs might include rent, freight, and administrative costs. ?For simplicity, accounting tracks costs by function (., materials, salaries, benefits) rather than by the activity devoted to product lines (., maintenance of product A, freight for product B) ?For costs that are not easily assigned to individual product lines, panies normally select the most convenient way to assign them, not necessarily the best way –for example, panies tend to allocate rent costs based on something that is easy to measure, such as direct labor dollars for each product line. A better allocation method, however, might be the actual space resource demands of each product line Most panies lack accurate cost data by product. Why Costs Are Often Not Allocated Correctly bc BOS Copyright169。 Company, Inc. bc BOS Copyright169。 1998 Bain amp。 1998 Bain amp。 1998 Bain amp。 Company, Inc. Cost Accounting 14 Cost Accounting The following is an illustration of cost behavior for fixed, semivariable, and variable costs: Cost (Dollars) Volume (Units) Variable costs Semivariable costs Fixed costs Fixed vs. Variable Illustration bc BOS Copyright169。 Company, Inc. Cost Accounting 18 Cost Accounting ?Importance of cost allocation ?Client example ?Definitions –direct vs. indirect, fixed vs. variable –breakeven volume ?Exercises –cost allocation –breakeven volume ?Key takeaways Agenda bc BOS Copyright169。 1998 Bain amp。 Company, Inc. Cost Accounting 25 Cost Accounting ?Labor –In many client situations, restraints placed by unions and difficulty in hiring and firing people in response to short term volume fluctuations make a portion of labor costs behave as fixed costs ?Electricity to run machines –In theory this is direct, but in practice it is considered indirect because it is difficult to trace electricity cost to products –Also, the 80/20 rule applies here. Electricity is usually a small cost item, and, for simplicity, could be allocated using machine hours spent on production ?Advertising –Usually, advertising is not tied to volume. For example, advertising to support a corporate brand is not tied to the volume of the products under that brand. If advertising is not tied to volume, it is fixed and indirect. There are few caveats: Cost Allocation Exercise Caveats bc BOS Copyright169。 Company, Inc. Cost Accounting 29 Cost Accounting *The most effective way to calculate the breakeven volume is to write a simple formula in Excel Step 5: Calculate breakeven volume Breakeven volume = For 10 students: = students with 10 students the program does not If you keep increasing the number of students by one and redoing the calculation*, you will find that the business school needs to have 15 students to break even on the executive program Fixed costs Unit contribution $140,000 $9,800 Now you are ready calculate the breakeven volume. For 15 students: $120,000 $9,800 = students break even Breakeven Exercise Answer (3 of 3) bc BOS Copyright16