Chapter 2 Problem 2.54 Textbook- Cost Management by ELDERNBERG. WOLCOTT. CHEN.COOK Measuring, Monitoring, and Motivation Performance Personal Cost Function, Information System, Two-Point and High-Low Methods Pick a cost from personal budgets that vary, such as entertainment, education, or automobile operating expenses. For this cost, practice using the estimation technique you have learned in this chapter. Required A. A. Apply engineered estimate of the cost to develop a monthly budget for the cost by analyzing what you think the cost should be. Use the following steps: Identify the activities that drive the cost. Plan the monthly level for each activity Determine a cost per unit for each activity Combine the activity level with the cost to create a monthly budget. B. Apply analysis at the account level to your cost. Analyze your Cheque book, credit card Statement or other spending information to gather several months past expenditures for this cost. Study this information to gain an understanding of the types of the cost you have incurred in the past. Then address the following questions: 1. Can you classify the cost as fixed, variable, or mixed? why or why not? 2. Are you missing information for some parts of the cost (such as for cash expenditure)? In what ways could you change your record keeping to provide better information About this cost? What would be the cost and benefit of doing so? C. Refer to the cost information you gathered for Part B. If you think that the cost is a variable or mixed, select one or more potential cost driver and collect data for them. Create a scatter plot of the cost against each cost driver. If you do not think the cost is variable or mixed, create a line chart of the cost over time. Examine your chart. Do you see any pattern? For example, does the cost seem to increase with a cost driver (or over time)? Does the cost seem to be fixed at a given level? How does the graph affect your understanding of this behavior? Explain D. If you think your cost is variable or mixed, refer to the data you used to create the scatter plot in Part C. Choose only one cost driver and use the two-point and high-low method to estimate the cost function. 1. Are the cost functions similar? Why or why not? 2. Are the fixed and variable costs about what you would expect them to be? Why or why not? 3. How comfortable would you be using one of these cost function to create a budget for next month? Explain. E. In what ways is your personal budget estimation problem the same as the cost estimation problem for business? Explain.