This website uses cookies to ensure you have the best experience. Learn more

Cost Behavior Essay

2248 words - 9 pages

A Discussion on Cost Behavior in Relation to Financial Statements


Interpreting figures presented on the financial statement has always been a hectic task to the public. A trend analysis assists in the evaluation of the financial presentation of a business over a specific period of time. Periods to be analyzed ranges from months, quarterly, half yearly or between specific years depending on the situation. In accounting, two methods are widely adopted to analyze the income statement and balance sheet trends. The techniques adopted are the horizontal analysis or the vertical analysis. The two analyses help the users of financial information to compare the ...view middle of the document...

On the balance sheet, all components are calculated as a percentage of total assets.
In my analysis, I will consider the use of the horizontal analysis technique to analyze the following components of the income statement and balance sheet; revenues, cost of goods sold, accounts receivables; accounts payable and inventory. From our excel sheet that is attached, I have computed some percentage changes in the components above which are extracted from the balance sheet and income statement. My analysis is based Exxon Mobil and Chevron Corporation (Chevron 2009 Annual Report) which specialize in oil producing and manufacturing of petroleum products. The financial statements under scrutiny are for the periods between 2008 and 2009, extracted from the company’s annual reports.
This is among the best performing companies when it comes to oil exploration. From my analysis both companies’ revenues have decreased from the previous period. Exxon Mobil has experienced a decrease in revenue by 57.36% while Chevron Corporation experienced a decrease of 56.19% for the year ending 31 December 2009. The decrease in revenue could have been the result of the changing in economic conditions in the oil markets and also changes in demand and supply of their commodities.
The cost of goods sold by the two companies has also been on a downward slope. Exxon Mobil has its cost of goods sold decreased by 38.74% while Chevron is at 41.85%. Exxon Mobil is, therefore, making more sales compared to Chevron Corporation. Exxon Mobil has also been receiving much of their accounts receivables at an 11.91%. This is a good sign to the company as it lowers the risk of bad debts. On the other hand, Chevron Corporation has also experienced an increase in accounts receivables at 11.64%. This influences the cash flows to the organization as it increases the company’s revenues and lowers the debt owed to the companies.
Accounts payables for Exxon Mobil has increased by 12.64% meaning we owe more people money. This can have a positive impact to Exxon in the future as it expects to make high income from the goods it has acquired on credit. Chevron has reduced its accounts payables by 0.86%. This means that the company has paid off most of its debts as per the current period. A reduction in accounts payables would be an advantage to the company as it has reduced its debts, but it can also reduce its liquidity. Inventory for both companies has also reduced. Exxon Mobil has lowered its inventory by 0.80% while Chevron is at 19.33%. The companies are not having trouble selling its inventory thou Chevron are doing better.
To my point of view, after analyzing the two companies, I would go for Exxon Mobil, which seems to have a brighter future. It has the ability to increase its sales and thus revenue. The increase in accounts payables gives us a hint that in the future, it expects higher returns from its...

Other Essays Like Cost Behavior

Risk Management Essay

1633 words - 7 pages value? a. Shareholders do not do a good job of monitoring manager behavior. b. Managers of large firms generally have very high salaries. c. Managers are often excessively cautious in their risk management decisions, spending too much on insurance and loss control. d. Managers are often compensated with bonuses linked to the firm’s profitability or stock price. Answer: d Type: K 7. The cost of risk is equal to: a. the value of

Behavior and Its Effects on Education

1641 words - 7 pages , data will be monitored less frequently. | 1.Major/Minor Infraction2. Behavior Interventions3. Classroom Management | These professional development opportunities will be provided at the district’s annual Education Expo. The courses will be lead by staff in the district that are trained in these areas. It will cost 25.00 dollars per hour, per person that attends the session/course. | Find alternatives to out-of-school suspensions for major

The Importance of Class Behavior

472 words - 2 pages for talking for the remainder of the class period and we accept that. It is our responsibility to keep our mouths quiet when the teacher is lecturing and when class has begun, therefore we shall be willing to accept the mandatory consequences at this cost (writing this essay, for instance!). We hope to be in better behavior and treat the teacher and students with respect at all times while contributing to the best of our abilities when we are

Manufacturing Notes

589 words - 3 pages statement lists each important factory overhead item and its cost. Total factory overhead cost for the period is $30,000. Some companies report only total factory overhead on the manufacturing statement and attach a separate schedule listing individual overhead costs. Point: Manufacturers sometimes report variable and fixed overhead separately in the manufacturing statement to provide more information to managers about cost behavior. 4. The

Management Accounting

903 words - 4 pages   VARIABLE   Volume   Total   Total   VARIABLE   Volume   FIXED   Volume   Summary of Variable and Fixed Cost Behavior Cost Variable In Total increases Per Unit does not change Fixed does not change decreases fix   fix   variable   variable   variable   variable   Contribution margin pU= sales revenue pU – variable costs pU Sales   revenue

Acc Week 4 Assignment

1029 words - 5 pages finished goods (131,000) Cost of goods sold 227,000 5. Manufacturing statements and cost behavior Tampa Foundry began operations during the current year, manufacturing various products for industrial use. One such product is light-gauge aluminum, which the company sells for $36 per roll. Cost information for the year just ended follows. Production and sales totaled 20,000 rolls and 17,000 rolls, respectively There is no

Irresponsible Sexual Behavior Intervention

2099 words - 9 pages . The second stage is all about making a commitment to reduce high risk sexual contacts and to increase low risk activities. The perceived benefits play a major role in this stage. Issues listed below can help and individual decide the take action to change their behavior. • cost and benefits • response efficacy ( example , will the changes reduce the risk of an outcome ) • Knowledge of the health utility and enjoy ability of a sexual practice, as


999 words - 4 pages quarter 58620-(35 x 140) 58620-4900 = $53,720 2nd quarter c. If present cost behavior patterns continue, determine total shipping costs for 20X7 if activity amounts to 570 orders. $79,800 ? 4. Break-even and other CVP relationships Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year. a. How many patient days does the hospital need to break even

Does the Media Influence Violent Behavior?

858 words - 4 pages talking on the phone, and they in turn will mimic that parent with a make believe or toy phone. Older children will imitate actions they have seen others do when confronted with a conflict. Lt. Col. Dave Grossman’s book, On Killing: The Psychological Cost of Learning to Kill in War and Society identifies three conditioning factors to which our children are exposed: classical conditioning, operant (behavior) conditioning, and social learning

Sunk Cost

517 words - 3 pages different decisions than would be dictated by efficiency or profitability, and this is considered an incentive problem and distinct from a sunk cost problem. Evidence from behavioral economics suggests this theory fails to predict real-world behavior. Sunk costs greatly affect actors' decisions, because many humans are loss-averse and thus normally act irrationally when making economic decisions. Sunk costs should not affect the rational decision

Cost of Production

4000 words - 16 pages incurred to make goods and services is called the Cost of Production. What would one do after making goods and services? The main motive of supplier of any firm is to sell his or her goods and services in the market and make profits. So, it would be no wonder if we say that a firms’ behavior is related to the Law of Supply which states that a firm wants to produce/sell more of a good when the price of that good is higher, thus resulting in an

Related Papers

Productive And Counterproductive Behaviors Essay

574 words - 3 pages behaviors. These behaviors are not only harmful for the employees but can be detrimental for the organization. Counterproductive behavior goes against the goals and objectives of the organization and can cause setbacks. An example of counterproductive behavior is absenteeism. This creates serious problems for the organization, especially for the clients of the organization that rely on the employee. The impact of absenteeism can cost the

Chapter 16 Managerial Accounting Concepts And Principles

1100 words - 5 pages produced (those units don't need to multiply on number of hours, just write as they were listed) E) Multiply the result of step D on number of hours and fill out into the table and then count total cost. F) Repeat steps C-E for product B. Chapter 19 Cost behavior and cost-volume profit analysis 1) Fixed and variable cost | Per unit | Total | Fixed cost | Increase of units, decrease of cost | The same | Variable cost | The same

Introduction To Managerial Accounting Essay

744 words - 3 pages to produce accurate results. Additionally, the periods with the highest and lowest activity tend to be unusual. A cost formula that is estimated solely using data from these unusual periods may misrepresent the true cost behavior during normal periods. 1-14 What is the difference between a contribution format income statement and a traditional format income statement? Contribution format income statement is an income statement format that

Almarai Information Essay

669 words - 3 pages business world. Understanding how the cost of a product is determined, as it moves through the manufacturing process, enables students to gain insight into how pricing decisions are made. They will be in a better position to determine whether a business is price gouging and can be an effective force in countering such behavior. Understanding budgeting systems enables one to properly manage a business and diagnose the