Types of Costs in Manufacturing Business Organization Free-Samples

Question: Write two types of Mix Cost Analysis and Scope. Answer: Various types of costs can be seen in the manufacturing business organizations. On the other hand, various methods are there to analyze the mixed costs of the business organizations. Two of those methods are Least Square Regression method and Engineering Analysis method or Engineering approach of mixed cost analysis. The detailed analysis of these two methods is discussed below: Least Square Regression method Least square regression refers to a particular statistical technique that the business organizations use to estimate the total costs of a particular business activity. This method is based on the past cost data of the business organizations. In the process of least square regression method, with the help of mathematics, a straight cost line is set over a scatter chart of a number of activities. In this process, the number of activities and total pairs cots are paired in such a way that the vertical distance between cost line and scattered line is minimized (Mehmood et al., 2012). In the process of least square regression method, the cost line is represented as the following equation: Y = a + bx Advantages: The method of least square regression has become one of the major and popular method for mixed cost analysis due to its effectiveness and completeness. In spite of the presence of various kinds of methods for analyzing the non-linear parameters, many processes in cost accounting are well explained with the help of least square regression. The estimation of unknown parameters is the optimal estimates under the method of least square regression. One of the major advantages of least square regression method is that with the help of this method, good results can be derived from a small data set. The theory of least square regression method is one of the easy understandable theories that help in constructing different types of statistical interpretations. These statistical interpretations can be used to solve different types of cost related problems in the business organizations (Draper Smith, 2014). Disadvantages: The major disadvantage of least square regression is that it has its limitations in shaping the linear models over long ranges. The method of least square regression is very sensitive at the time of handling the unusual data points. This process makes the process of model validation more critical. The model of least square regression is not very effective in case of extrapolating (Draper Smith, 2014). These are the main disadvantages of least square regression. Engineering Analysis The engineering analysis is mainly used for the purpose of cost function estimation. With the help of engineering analysis, the accountant use to look for values. The engineering analysis method is highly applicable for the business organizations having heavy processes. The approach of engineering analysis is a simple approach to infer the cost of the products. This process is called engineering approach as much of the data comes from the previous sales of the products (Miles, 2015). The advantages of disadvantages of engineering analysis are discussed below: Advantages: The method of engineering analysis has many major advantages. Companies that want to introduce new products in the market but do not have any experience in that particular field, engineering analysis is perfectly suitable for these kinds of companies. Without the help of any past sales data and information, the engineering analysis method helps to make the cost estimation for the companies. Hence, it can be said that the method of engineering analysis is a helpful tool for the business organizations that wants to forecast the costs of any product without having any kind of previous experiences in that particular field (Hagan, Sulkowski Schinazi, 2014). Disadvantages: In spite of the presences of many advantages, the method of engineering analysis has some major disadvantages. Most of the accountants consider the process of engineering analysis as a vague approach when compared to the detailed analysis of past sales data. The cost estimates that are made with the help of engineering analysis sometimes become inaccurate at the time of original cost determination (Hagan, Sulkowski Schinazi, 2014). Hence, it increases the scope of errors. These are the main disadvantages of the engineering analysis method. From the above analysis about the two mixed cost analysis method, it can be said that both the methods are important for the purpose of mixed cost analysis. On the other hand, both these methods have some specific disadvantages. However, the above discussion helps to determine that the method of engineering analysis is more superior to least square regression method as the method of engineering analysis helps the organizations to determine the cost estimates of the new products in spite of not having any experience in that field. References Draper, N. R., Smith, H. (2014).Applied regression analysis. John Wiley Sons. Hagan, L. M., Sulkowski, M. S., Schinazi, R. F. (2014). Cost analysis of sofosbuvir/ribavirin versus sofosbuvir/simeprevir for genotype 1 hepatitis C virus in interferon?ineligible/intolerant individuals.Hepatology,60(1), 37-45. Mehmood, T., Liland, K. H., Snipen, L., Sb, S. (2012). A review of variable selection methods in partial least squares regression.Chemometrics and Intelligent Laboratory Systems,118, 62-69. Miles, L. D. (2015).Techniques of value analysis and engineering. Miles Value Foundation.