Cost Accounting (15th Edition)

Published by Prentice Hall
ISBN 10: 0133428702
ISBN 13: 978-0-13342-870-4

Chapter 10 - Determining How Costs Behave - Assignment Material - Questions - Page 407: 10-5

Answer

Four approaches to estimating a cost function are: 1. Engineering Analysis 2.Account Analysis 3.Scattergraph or Graphical Analysis 4.Regression Analysis 5.Conference method

Work Step by Step

Four approaches to estimating a cost function are: Engineering Analysis: This method relies on a detailed analysis of the production process and its components. Engineers study the relationship between inputs (e.g., labor, materials, machine hours) and costs to create a cost function. Account Analysis: Accountants use their knowledge of financial and cost accounting to identify cost behavior patterns. They examine historical data, cost records, and financial statements to estimate cost functions. Scattergraph or Graphical Analysis: This approach involves plotting cost data points on a graph and looking for patterns or trends. By visually analyzing the data, analysts can make rough estimates of cost functions. Regression Analysis: This statistical technique involves using regression models to analyze the relationship between cost and cost drivers. It is a more quantitative and sophisticated approach, providing precise estimates of cost functions based on historical data.
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