Cost, Profit and Cost Function Essay Example | Topics and Well Written Essays - 1000 words

Cost, Profit and Cost Function - Essay modellingdid not have adequate information regarding follow, gelt and the various nuances of represent of the company, the profit and also cost pop offs. So in order to give them a complete understanding of the various methods of find the cost go away, relationship between cost and profit have been discusses, the basic concepts of cost function has been explained and thus the methods for determining cost function has been evaluated. Cost, Profit and Cost Function There are many factors that are include in profit planning, such as cost, profitability and volume. Here the focus would be only on cost and profit. Cost is inversely proportional to profit, that means lower the cost, higher the profit (Jayapandian 2008, 393). The revenue reduce is controlled by the customers, while the organization gouge only control the cost curve. The fluctuations in the variable cost changes the slope of the cost curve, but the increase of heady cost ma y add togetherly wipe step up the profits of the company. Variable cost has high frequency of fluctuation than fixed costs. When the cost of the company equals its generated income, then it is termed as breakeven point. The margin above this point is the profit of the company (Kolitz, Quinn, and McAllister 2009, 301-303). Cost functions are nothing but economic face that replicates the functions of the output and input prices. In a laymans language we can say that it simply involves finding the cost of materials for production of a particular quantity of goods. Cost function is actually a mathematical explanation which estimates the changes in cost with the levels of change related to such cost. For model actives involved in preparing the operating machines and production runs. Cost function can be explained through vivid representation in which measurement of activity levels, such as machine hours required or the total amount of goods produced in the given time can be assessed (Horngren 1967, 308). There are various methods of calculative cost function, such as engineering, visual fit, regression, and account analysis. The engineering analysis is past experienced found review of cost in a systematic manner. Visual fit as the name advert is a representation of data in a scatter diagram. Regression analysis includes mathematical formula to ascertain the cost equation that fits the data best. High low method utilizes linear algebra for the determination of fixed and variable costs, but the results are not reliable. Lastly, account analysis deals with analyzing the accounting records and determining the behavioral patterns (Whittington and Delaney 2007, 398-399). decision Cost and profit go hand in hand. Cost of the company needs to be cut down to increase profit. Cost functions include functions like planning and controlling the various activities of the organization and accurately estimates the project fixed and variable cost. There are various method s that are utilized to estimate the cost function such as regression method, engineering method, account method, visual fit method, high-low method, etc. The usage of for each one of these methods depends on the data available and the type of analysis required by the manager. Presentation 6 conception In this presentation the relationship between volume, costs and price would be explained so as to argue the effect of changes in each element on the other. Bond & ltd. wanted to project the changes in profit figures due to fluctuations in volume and cost. So in this presentation an explanation of all these terms would be sated for the management to understand the concepts carefully. Cost, profit and volume can be represented graphically and also in the form of equation. Graphical representation is easier for managers to understand, as they can easily