某咨询资本财务分析CostAccounting.pptx
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某咨询资本财务分析CostAccounting.pptx
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bcBOSCopyright1998Bain&Company,Inc.CostAccountingAuthor:
CollinsQianReviewer:
BobArmacostbcCostAccountingMarch1998Copyright1998Bain&Company,Inc.1CU7030298IMBbcBOSCopyright1998Bain&Company,Inc.CostAccountingImportanceofcostallocationClientexampleDefinitionsdirectvs.indirect,fixedvs.variablebreakevenvolumeExercisescostallocationbreakevenvolumeKeytakeawaysAgenda2CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingImportanceofcostallocationClientexampleDefinitionsdirectvs.indirect,fixedvs.variablebreakevenvolumeExercisescostallocationbreakevenvolumeKeytakeawaysAgenda3CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingWhichproductsareprofitable?
Whatisthebreakevenvolumebyproduct?
Whichproductsrequirecostreductionefforts?
Howshouldwepriceourproducts?
Whichcustomersegmentsaremostprofitable?
Itiscriticaltohaveaccurateandcompletecostdatatomakesoundstrategicandtacticalmanagementdecisions.WhyAllocateCosts?
4CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingHistorically,only20%ofmanufacturingcostswere“shared”acrossproductlines.Today,typically50%ofcostsare“shared”acrossproducts.Sharedcostsmightincluderent,freight,andadministrativecosts.Forsimplicity,accountingtrackscostsbyfunction(e.g.,materials,salaries,benefits)ratherthanbytheactivitydevotedtoproductlines(e.g.,maintenanceofproductA,freightforproductB)Forcoststhatarenoteasilyassignedtoindividualproductlines,companiesnormallyselectthemostconvenientwaytoassignthem,notnecessarilythebestwayforexample,companiestendtoallocaterentcostsbasedonsomethingthatiseasytomeasure,suchasdirectlabordollarsforeachproductline.Abetterallocationmethod,however,mightbetheactualspaceresourcedemandsofeachproductlineMostcompanieslackaccuratecostdatabyproduct.WhyCostsAreOftenNotAllocatedCorrectly5CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingImportanceofcostallocationClientexampleDefinitionsdirectvs.indirect,fixedvs.variablebreakevenvolumeExercisescostallocationbreakevenvolumeKeytakeawaysAgenda6CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingMiddleAmericaManufacturing,aBainclient,believedthatallthreeofitsproductlineswereprofitable.Returnonsales:
10.0%2.4%1.6%Sales:
$250MM$100MM$75MMMiddleAmericaManufacturing-EstimatedProfitability7CU7122397ECARidingmowersBicyclesWalkingmowers$25.0MM$2.4MM$1.2MM$0$5$10$15$20$25$30PretaxOperatingProfit(MillionsofDollars)bcBOSCopyright1998Bain&Company,Inc.CostAccountingAfterathoroughevaluation,theBainteamfoundthat$8.0MMincostshadbeenallocatedincorrectlyamongthethreeproducts.MiddleAmericaManufacturing-CostAllocation8CU7122397ECAWalkingmowersBicyclesRidingmowersWalkingmowersBicyclesRidingmowersOriginalallocationRevisedallocation$8.0MM$8.0MM$0$2$4$6$8$10Cost(MillionsofDollars)bcBOSCopyright1998Bain&Company,Inc.CostAccountingTheBainteamalsodeterminedthatanadditional$18.8MMincostsshouldbeallocatedtothethreeproducts.MiddleAmericaManufacturing-AdditionalCosts9CU7122397ECAGeneraladministativeexpensesSystemscostsInventorycarryingcostsWalkingmowersBicyclesRidingmowersAdditionalunallocatedcostsAdditionalcostsreallocated$18.8MM$18.8MM$0$5$10$15$20Cost(MillionsofDollars)bcBOSCopyright1998Bain&Company,Inc.CostAccountingBainsanalysisindicatedthatbothbicyclesandwalkingmowerswereunprofitable.MiddleAmericathenbegantoinvestigatewhethertoexitorfixthesetwobusinesses.Returnonsales:
7.2%(3.0%)(6.9%)Sales:
$250MM$100MM$75MMMiddleAmericaManufacturing-ActualProfitability10CU7122397ECARidingmowersBicyclesWalkingmowers$18.0MM($3.0MM)($5.2MM)($10)($5)$0$5$10$15$20ProductLineProfitability(MillionsofDollars)bcBOSCopyright1998Bain&Company,Inc.CostAccountingImportanceofcostallocationClientexampleDefinitionsdirectvs.indirect,fixedvs.variablebreakevenvolumeExercisescostallocationbreakevenvolumeKeytakeawaysAgenda11CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingDefinitions:
CoststhatdonotvarydirectlywithchangesinoutputCoststhatvarydirectlywithchangesinoutputCostsincurreddirectlyintheproductionordeliveryofafirmsproductorservice.Thesecostscaneasilybeidentifiedwith,orassignedto,aparticularproductCostsgenerallyincurredbythefirmoutsideoftheproductionprocess.Thesecostscannoteasilybeidentifiedwith,orassignedto,aparticularproductAllcostscanbebrokendownalongtwodimensions.FixedVariableDirectIndirectvs.vs.Examples:
EquipmentdepreciationRentAdvertisingRawmaterialsProductionlaborDeliverycostsDirectlaborDedicatedequipmentRawmaterialsSG&AOfficesuppliesPlantmanagerRuleofthumb:
Ifaparticularcostchangeswhenproductionincreasesordecreases,thecostisvariable.Ifaparticularcost“goesaway”whenaproductisdroppedfromtheproductline,thecostisdirect.TypesofCosts12CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingAllcostsarevariableoveraverylongtimehorizon(i.e.,forverylargeincreasesinvolume)Coststorunandmaintainacomputersystemthattracksproductordersareclearlyfixedforasmallchangeinvolume,suchasthatassociatedwithaslightlybusymonth.However,theyarevariableforalargechangeinvolume,suchasthatassociatedwithanewplant.Mostcostsaresemi-variable(i.e.,theytendtobeaddedinlumpsasvolumeincreases)Supervisorylabortendstobeconsideredfixedbecauseitisunlikelythatadditionalsupervisorswouldhavetobeaddedtohandleasmallincrease,say10%,involume.Buttheworkforcecanonlyincreasesomuchbeforeanadditionalsupervisorisneeded.Intheory,productionlaborisvariable.However,inmanyclientsituations,restraintsplacedbyunionsanddifficultyinhiringandfiringpeopleinresponsetoshort-termvolumefluctuationsmakeit,inpractice,semi-variable.Definingtheappropriatetimehorizonfortheanalysisisimportant.AmeaningfulanalysiswillisolatethefixedcostandvariablecomponentsofaparticularcostFixedvs.Variable13CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingThefollowingisanillustrationofcostbehaviorforfixed,semi-variable,andvariablecosts:
Cost(Dollars)Volume(Units)VariablecostsSemi-variablecostsFixedcostsFixedvs.Variable-Illustration14CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingItisusefultoknowthefollowingtermswhendoingcostanalysis:
Simplifiedincomestatement:
-VariableCostGrossMargin-FixedCostOperatingMarginRevenue=PriceperUnitxVolumeGrossmarginisalsocalled“GrossProfit,”or“ContributionMargin”OperatingMarginisalsocalled“OperatingProfit”RevenueIncomeStatementTerms15CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingBreakevenvolumeisthevolumeatwhichthecompanycoversitsfixedcosts.Atbreakevenvolume,theoperatingprofitiszero.VolumeContributionmargin(i.e.,revenuelessvariablecosts)FixedcostsBreakevenvolume$OperatingLossFixedcostsUnitcontributionPriceperunit-VariablecostperunitBreakevenvolume=Fixedcosts=OperatingProfitContributionMarginBreakevenVolume16CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingOperatingProfit=Revenue-Costs=Revenue-VariableCosts-Fixedcosts=(PriceperunitxVolume)-(VariablecostperunitxVolume)-Fixedcosts=Volumex(Priceperunit-Variablecostperunit)-Fixedcosts=VolumexUnitcontribution-FixedcostsThebreakevenvolumeisthevolumeforwhichoperatingprofit=00=BreakevenvolumexUnitcontribution-FixedcostsFixedcostsUnitcontributionPriceperunit-VariablecostperunitBreakevenvolume=Fixedcosts=BackupforBreakevenFormula17CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingImportanceofcostallocationClientexampleDefinitionsdirectvs.indirect,fixedvs.variablebreakevenvolumeExercisescostallocationbreakevenvolumeKeytakeawaysAgenda18CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingAllproductsaremadeusingthesameequipmentandmachineryPlantsupervisorsoverseeproductionofallthreeproductsEquipmentcapacityexiststoincreaseproductionby50%SalespeoplesellallthreeproductsSalespeoplearepaidabasesalary,plusacommissionwhichisapercentageofthesellingpriceMostadvertisingisproductspecificThecompanyusesatruckingcompanytodeliverproductstocustomers(costsarebasedonthelengthoftripandweight)MapleLeafCompanywantstoallocatecoststothethreeproductsitmakesandsells.CostAllocationExercise-Background19CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingHowwouldyoucharacterizethefollowingcostsoveratimehorizoninwhichthecompanyplanstoincreasesalesvolumeby10%?
FixedVariableDirectIndirectCEOssalaryRawmaterialsSupervisorylaborProductionfloorlaborRentEquipmentdepreciationOfficesuppliesFreighttocustomerElectricitytorunmachinesInterestexpensetofinanceinventoryAdvertisingGoodwillamortizationSalescommissionsSalespeoplessalariesSalestravelandexpensesCosts:
CostAllocationExercise-Question20CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingCostAllocationExercise-AnswerMostcostsarefixedindirectorvariabledirect.FixedVariableDirectIndirectAdvertisingRawmaterialsProductionfloorlaborFreighttocustomerInterestexpensetofinanceinventorySalescommissionsEquipmentdepreciationCEOssalarySupervisorylaborRentOfficesuppliesGoodwillamortizationSalespeoplessalariesSalestravelandexpensesElectricitytorunmachines21CU7122397ECAbcBOSCopyright1998Bain&Company,Inc.CostAccountingCostComponentsFixedvs.VariableDirectvs.IndirectAdvertisingFixed,becauseadvertisingisusuallynottieddirectlytovolumeDirect,because,inthiscase,mostofitisproductspecificEquipmentd
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