management accounting cost behaviour AAD

cost behaviour

1. MATRIKULASIPROGRAMMAGISTER
AKUNTANSI
FAKULTASEKONOMI DANBISNIS
UNIVERSITASUDAYANA
Dr. Ayu AryistaDewi, SE.,M.Acc.,Ak.,CA
Materi:
AkuntansiManajemen
Pert 1, 25 Agustus2025

2. MANAGEMENT ACCOUNTING VS
FINANCIAL ACCOUNTING
Criteria Management Accounting Financial Accounting
Focus Internal decision-making External reporting
Orientation Future-oriented Historical-oriented
Rules Flexible, no mandatory rulesGAAP/IFRS compliance
Information Financial & non-financial, may
be subjective
Objective, standardized
Level of Detail Detailed by
segment/department
Aggregated, company-wide

3. COSTS VS EXPENSES
Cost: sacrifice of resources to obtain current or future benefits.
Expense: expired cost.
Cost Object: product, department, activity, customer, etc.
Assigning a cost to a cost object using an observable measure of the
resources consumed by the cost objecttracing
Costs that cannot be traced by using either direct or driver tracing are
called indirect costsallocationto assign indirect costs to cost objects

4. "COST" AND"EXPENSE" AREINTERCHANGEABLE
INEVERYDAYLANGUAGE????
What is a key differences?
Time Horizon:
A cost can be a one-time purchase with a long-term benefit, like buying a new delivery van.
An expense is typically a recurring payment for something that gets "used up" or expires
quickly, such as a monthly salary or rent.
Accounting Treatment:
Costs: can be capitalized (treated as assets on the balance sheet) and then gradually
expensed over their useful life, such as a new building or machinery.
Expenses: are recorded in the period they are incurred and directly reduce profit in that
period.
Impact to Profitability:
Expenses directly impact short-term profitability by reducing revenue, while capitalized
costs are spread out, affecting profits over a longer timeframe.
Examples:
Cost: The price you pay to purchase a new piece of equipment, or the cost of raw materials
used to build a product.
Expense: The salary for an employee's work, the cost of electricity to run your office, or rent
for your business premises.

5. PRIME & CONVERSION COSTS
Prime Cost = Direct Materials + Direct Labor.
Example: DM Rp 50,000 + DL Rp 30,000 = Rp 80,000.
Conversion Cost = Direct Labor + Overhead.
Example: DL Rp 30,000 + OH Rp 40,000 = Rp 70,000.

6. TYPES OF COSTS (WITH EXAMPLES)
Type of Cost Definition Example
Fixed Does not change with activity
level
Factory rent, insurance
Variable Changes directly with activityDirect materials, commission
Mixed Fixed + variable componentsElectricity bill
Step Fixed within a range, jumps at
threshold
Supervisor salary

7. FIXED COST BEHAVIOR
0
500
1000
1500
2000
2500
0 1000 2000 3000 4000
Fixed Cost
Fixed Cost

8. VARIABLE COST BEHAVIOR
0
500
1000
1500
2000
2500
3000
3500
4000
4500
0 1000200030004000
Variable Cost
Variable Cost

9. MIXED COST BEHAVIOR
0
1000
2000
3000
4000
5000
6000
7000
0 1000 2000 3000 4000
Mixed Cost
Mixed Cost

10. STEP COST BEHAVIOR
0
1000
2000
3000
4000
5000
6000
7000
0 1000 2000 3000 4000
Step Cost
Step Cost

11. METHODS TO SEPARATE COSTS
High-Low Method.
Scatterplot Method.
Least Square Regression.

12. HIGH-LOW METHOD EXAMPLE
Activity Data: 1,000 units = Rp5,000,000; 3,000 units =
Rp11,000,000.
Variable Cost per unit = (11,000,000 - 5,000,000) / (3,000 - 1,000) =
Rp3,000/unit.
Fixed Cost = 5,000,000 - (1,000 × 3,000) = Rp2,000,000.

13. DISCUSSION EXERCISE
Classify the following costs:
1. Administrative staff salaries → Fixed.
2. Factory electricity (fixed + usage) → Mixed.
3. Raw material cost → Variable.

14. MANAGERIAL APPLICATIONS
Understanding cost behavior helps managers in:
• Budgeting and Planning.
• Cost-Volume-Profit (CVP) Analysis.
• Short-term decisions (make or buy, pricing, outsourcing).

15. CASE STUDY
Factory electricity: Rp10 million/month + Rp1,500 per kWh.
If factory uses 8,000 kWh:
Fixed Cost = Rp10 million.
Variable Cost = 8,000 ×1,500 = Rp12 million.
Total Cost = Rp22 million.

16. REFLECTIVE QUESTIONS
1. Why is understanding cost behavior important in budgeting?
2. What happens if costs are misclassified?
3. How do cost behaviors differ in service vs manufacturing
industries?

17. SUMMARY
Differences: Management vs Financial Accounting.
Concepts: Cost vs Expense, Prime & Conversion Cost.
Types of Costs: Fixed, Variable, Mixed, Step.
Methods to Separate Costs: High-Low, Scatterplot, Regression.
Applications in budgeting, CVP, decision-making.

18. QUIZ 1: IDENTIFY COST BEHAVIOR
Question:
1. Factory rent of Rp 15 million per month.
2. Sales commission of Rp 50,000 per unit sold.
3. Electricity bill Rp 2 million + Rp 1,000 per kWh.

Solution:
1. Fixed Cost.
2. Variable Cost.
3. Mixed Cost.

19. QUIZ 2: HIGH-LOW METHOD
Question:
At 1,000 units → Cost Rp 5,000,000.
At 3,000 units → Cost Rp 11,000,000.
Calculate variable cost per unit and fixed cost.

Solution:
Variable Cost per unit = (11,000,000 - 5,000,000) / (3,000 - 1,000) =
Rp 3,000.
Fixed Cost = 5,000,000 - (1,000 × 3,000) = Rp 2,000,000.

20. QUIZ 3: APPLICATION
Question:
A company considers producing an extra 500 units.
Variable cost per unit = Rp 2,000.
Fixed cost = Rp 10,000,000 (unchanged).
What is the additional cost?

Solution:
Additional cost = 500 × 2,000 = Rp 1,000,000.
Fixed cost remains unchanged.

21. CLASS DISCUSSION
Discussion Questions:
1. How might cost behavior differ in a tech startup vs a
traditional manufacturing firm?
2. What challenges do managers face when classifying mixed
costs?
3. How could misclassification of costs affect strategic decisions
(e.g., pricing, outsourcing)?
4. Discuss an example from your own professional experience
where understanding cost behavior was crucial.