Cost Analysis
COST ANALYSIS
Prepared by:
Nebuchadnezzar Rabaya
OBJECTIVES
To provide a basic understanding of the nature of cost analysis.
To give highlights on the importance of cost analysis on any venture.
To present a clear overview on various
types of costs.
Cost
Definition:
an amount that has to be paid or spent to buy or obtain something.
Analysis
Definition:
is the process of breaking a complex topic or substance into smaller parts to gain a better understanding of it.
What is cost analysis?
A tool to determine the monetary value or resources used to run a project or services or a business. What is cost analysis?
A review and evaluation of the cost element and profit.
Why do we need cost analysis?
1. To understand how best to distribute resources to improve the outcome.
Why do we need cost analysis? 2. It is vital in handling a timely decision making, whether to proceed or not to on a particular business or project.
Why do we need cost analysis? 3. Regardless of industry, it is relevant and of utmost importance to efficient operation of the company.
Why do we need cost analysis? 4. To evaluate and determine the reasonable or right pricing on a given product or services.
Types of Cost
Fixed Costs
These are costs which do not vary with the level of product sales. They remain the same regardless of increase/decrease in sales amount or volume.
Examples
Rental (fixed amount), depreciation, salary of security guards/janitors under agency, electricity/water/gas, telephone charges (local calls); insurance premiums;
Maintenance costs covered by service agreements.
Types of Cost
Variable Costs
These costs vary with the level of store sales.
As sales increase, so do the variable costs.
Examples
Royalty, Food & Paper items, Dailies cost, rental based on % of sales, operating supplies (store, janitorial supplies), local taxes
Types of Cost
Semi-Variable Costs
These are costs that are a combination of fixed and variable cost.
Examples
Taxes,
Prepared by:
Nebuchadnezzar Rabaya
OBJECTIVES
To provide a basic understanding of the nature of cost analysis.
To give highlights on the importance of cost analysis on any venture.
To present a clear overview on various
types of costs.
Cost
Definition:
an amount that has to be paid or spent to buy or obtain something.
Analysis
Definition:
is the process of breaking a complex topic or substance into smaller parts to gain a better understanding of it.
What is cost analysis?
A tool to determine the monetary value or resources used to run a project or services or a business. What is cost analysis?
A review and evaluation of the cost element and profit.
Why do we need cost analysis?
1. To understand how best to distribute resources to improve the outcome.
Why do we need cost analysis? 2. It is vital in handling a timely decision making, whether to proceed or not to on a particular business or project.
Why do we need cost analysis? 3. Regardless of industry, it is relevant and of utmost importance to efficient operation of the company.
Why do we need cost analysis? 4. To evaluate and determine the reasonable or right pricing on a given product or services.
Types of Cost
Fixed Costs
These are costs which do not vary with the level of product sales. They remain the same regardless of increase/decrease in sales amount or volume.
Examples
Rental (fixed amount), depreciation, salary of security guards/janitors under agency, electricity/water/gas, telephone charges (local calls); insurance premiums;
Maintenance costs covered by service agreements.
Types of Cost
Variable Costs
These costs vary with the level of store sales.
As sales increase, so do the variable costs.
Examples
Royalty, Food & Paper items, Dailies cost, rental based on % of sales, operating supplies (store, janitorial supplies), local taxes
Types of Cost
Semi-Variable Costs
These are costs that are a combination of fixed and variable cost.
Examples
Taxes,