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Chapter 6: Cost Evaluation & Analysis - Coggle Diagram
Chapter 6:
Cost Evaluation & Analysis
Fundamentals of costing evaluation
THE IMPORTANCE OF COSTING
• Definition: Monetary valuation in dealing with the aspect of material, goods/ services, risk issues, resources and etc.
• Basis for identification for product selling price
• Basis for identification for product’s profit projection
COST REDUCTION
A process involving finding, and removing unwarranted expenses without discriminates the product’s quality and increase in product’s profit
• To fully utilize all production capabilities
• Improve methods and reduce unwanted work in progress and inventory of product
COST CLASSIFICATION
Nonrecurring cost
• Recurring cost
• Fixed cost
• Variable cost
Fundamentals of costing method
COSTING EVALUATION METHOD
• INDUSTRIAL ENGINEERING APPROACH
• ANALOGY
• STATISTICAL APPROACH
PRODUCT PRICING
Product selling price that simultaneously and positively affects the customer interest and greatest profit generation
• METHOD TO IDENTIFY PRICE OF PRODUCT/SERVICE
Implementation of break-even chart
Manufacturing cost parameters
BREAK-EVEN CHART
Determine variable costs per product
Determine the fix cost
Draw the total cost as a function of the number of products on the chart
Determine the sale price of the products
Draw the sales as a function of the number of the product on the chart
The intersection of the sales line with the total price is the break even point