Begino, Vanessa Jamila D.

BMI – A1

GRADED ACTIVITY NO. 4

Final Period
Topic: Cost Analysis and Cost Management

This is 100 points graded activity. Do the following:

1. Explain in your own words the following importance of cost analysis (10 pts.)
a. Helps in decision-making
b. Solve problems
2. Briefly explain the following: (10 pts.)
a. Cost analysis
b.
c. Cost management
3. E0xplain the following components of cost management. (20 pts.)
a. Cost control
b. Cost estimation
c. Resource planning
d. Cost budgeting
4. Perform cost analysis and choose the better business project. Justify your
answer by giving brief explanation. (60 pts.)

You are planning to start up a business project, here are your options:
OPTION 1 – Cake and Pastry Business
• Goal – to earn Php 500,000 (for 1 year)
• Projected revenue - Php 1,500,000 (for 1 year)
• Direct cost – 200,000
• Indirect cost - 150,000
• Real cost - 270,000
• Tangible cost - 80,000
• Intangible cost - 180,000

OPTION 2 – Clothing and Apparel Business

• Goal – to earn Php 800,000 (for 1 year)
• Projected revenue - Php 2,500,000 (for 1 year)
• Direct cost – 400,000
• Indirect cost - 350,000
• Real cost - 550,000
• Tangible cost - 100,000
 • Intangible cost - 280,000

ANSWERS:
a. A cost-benefit analysis is a process that helps determine the economic merits of
a decision so you can decide whether it is worth pursuing. It's a useful tool if you
want to avoid bias in your decision-making process, especially when you're faced
with big decisions that impact the success of your team or project.
b. Cost analysis helps identify financial problems and find solutions. If your
company struggles with project management, cost analysis can help you stay
organized and gain a better understanding of your finances and future projects.

2.
a. Cost-benefit analysis is the process of comparing the costs and benefits (or
opportunities) of forecasts or estimates associated with a project decision to
determine whether it makes business sense.

b. Cost management is the process of planning and controlling costs associated

with running a business. It includes the collection, analysis, and reporting of
expense information to help you budget, forecast, and monitor expenses more
effectively.

3. a. Cost control is a method of reducing operating costs by managing and

analyzing financial data. By understanding costs in a consolidated format,
organizations can make more accurate and informed forecasts, know where to
minimize costs, and identify areas of overspending.
b. A cost estimation in project management is the process of forecasting the
financial and other resources required to complete a project within defined
boundaries. A cost estimate takes into account all the elements required for a
project (from materials to labor) and calculates a total amount that determines
the project's budget.

c. In resource planning, the cost manager reviews the scope and specifications
of the project to determine the resources required for the project. Resources are
tools, money, time, equipment, and even team members—anything that helps
you complete a project.

d. Cost Budgeting is a subprocess within Estimation that is used to associate

estimated resource costs with cost accounts that measure and evaluate cost
performance. This is the basis of cost control. Cost centers used by the chart of
accounts must also support the costing process.
4. First, I will make a cost analysis for the both projects to compare these two
projects so that It will help me to decide and determine what business project I
should invest in the future. The goal for Cake and Pastry Business is to earn
1,500,000 a year while in the Clothing and Apparel Business is to earn 2,500,000
a year. I will show you the computation of profit or net income for the both
projects.

CAKE AND PASTRY BUSINESS

Add: Direct cost – 200,000

Indirect cost - 150,000
Real cost - 270,000
Tangible cost - 80,000
Intangible cost - 180,000
Total 880,000

Projected revenue - Total cost = Net income/profit

1,500,000-880,000 = 620,000

It shows that the profit is 620,000 and it is more than the expected goal
which is 500,000 a year.

CLOTHING AND APPAREL BUSINESS

Add: Direct cost – 400,000

Indirect cost - 350,000
Real cost - 550,000
Tangible cost - 100,000
Intangible cost - 280,000
Total 1,680,000

Projected revenue - Total cost = Net income/profit

2,500,000 – 1,680,000 = 820,000

 It shows that the profit is 820,000 and it is also more than the expected
goal which is 800,000.

If you will compare the two results you will notice that both of them reach
and above the goal but the CAKE AND PATRY BUSINESS have more profit and
less expenses compare to CLOTHING AND BUSINESS APPAREL. In
conclusion. I chose to have the business project for CAKE AND PASTRY as it
has less expenses (cost) and has more profit gain than the CLOTHING AND
APPAREL BUSINESS.